3 Weeks In: The Effects of Losing an Income

It’s been three weeks since Mr. FIREDup lost his job.  Here’s an update on how things are going so far.

Summer Fun

A noticeable effect has been that we have more fun family time!  Mr. FIREDup can now do weekend chores during the week.  We aren’t spending Saturday morning at the grocery store, and he can mow our fast-growing spring lawn any weekday the weather cooperates.

You know those pesky little tasks around the house that never seem to get done when you’re working all the time?  We’ve got a list of those, and he can usually complete a couple things a day.

It’s really nice that his time off coincided with the weather improving significantly.  We’ve had more time to go to the park and enjoy other outdoor family activities the past few weekends.   He has also had time to indulge in one of his newer hobbies – photography.   That photo at the top of this post?  He took that on Monday while hiking in a nature area near our house.

The weeknight after-work dinner hustle has also calmed.  Mr. FIREDup is a great chef and now dinner prep is well underway by the time I get home with our daughter!

Excitement…but Uncertainty

I’m very excited to see what new opportunities might open up for my husband.  His particular work is a narrow niche, and there aren’t a tremendous number of opportunities in our local market.  I think this makes him feel a little uncertain about his prospects.  However, it’s also exciting because he can find something he really enjoys doing.  There have been a couple of promising leads, but nothing formal has materialized yet.

Gratitude

I’m extremely grateful that we came into this situation in good financial shape.  My solid salary and our generally good saving habits mean that this switch to a single-income household hasn’t derailed our finances.  In all honesty, if we were willing to tighten up our financial habits a bit, I think we could live on this income and still save for FI…it  would just be at a much slower pace.

Financial Freedom = Flexibility for Lifestyle Design

This pause in the rat race of having two full-time working adults in our household has made me think a lot about financial freedom and the trade-off between time and money.  Can we design a lifestyle with more flexibility, even if it slows down our savings?

What if my husband takes a part-time job that allows him to get home earlier to make dinner every night, or which gives him a day off every week to take care of household chores?  What if he takes on freelance work (something that is very common in his niche) rather than another traditional 9-to-5?  What if he finds a new full-time job, and that allows me to look for a part-time opportunity?  What if both of us could work part-time?

It’s exciting to think about how we can design our future lifestyle so that we have enough money to live comfortably but also have more control over how we spend our time.

Have you made trade-offs between time and money?  What mix of work works best for your (or your family’s) situation?

Almost Everyone is One Bad Boss Away from Getting Fired

We’re two weeks out from my husband’s job loss.  Since that time, I’ve relayed the story of what happened to him to a few friends.  When you talk about something slightly taboo, it often encourages people to share stories of their own.  Here are two such stories.

  • I’ve kept one of my good friends at work in the loop on the crazy things going on at Mr. FIREDup’s company.  Ironically, her own sister (who I’ll call E), who also works at our company, is going through a similar situation of her own.  E is a high achiever who has been successful in her career.  She came to our company as an executive and has been promoted since joining.  Somehow E has gotten on the bad side of one of her current executives, an intimidating woman who has worked at the company for nearly 30 years.  An incident from last week confirmed that her executive has a vendetta against her.  It’s not clear why.  It’s likely that she will either be asked to leave or need to find another job outside the company.
  • Another friend, a former work teammate, confided that she, too, has been through what my husband experienced.  She was asked to leave her previous employer because she was not performing in her job.  In fact, she had never shared this story with anyone at our company until telling me, which is understandable.  It feels shameful and demoralizing to go through this kind of experience, even though I know from firsthand experience that she is a conscientious, hardworking employee.

So what gives?

I’m not a conspiracy theorist.  I think the majority of the time, companies operate logically, and that people are fired for legitimate reasons.  But companies are made up of people, and people are flawed.  We have different personalities and different expectations.  Sometimes people are persecuted/forced out for reasons that don’t appear legitimate.  And when you work for someone else, you put yourself at the mercy of someone else’s whims.

Essentially, if you work for someone else, you are one bad boss away from getting fired. 

How does this relate to personal finance?

  • Build up an F-U fund.  Save or invest it however you want; the important part is making sure you can pay your bills if you find yourself unexpectedly unemployed.
  • Keep your skills sharp.  You never know when a good work situation can turn bad.  Today’s great boss could move on to the next thing, leaving you with a new boss that you clash with constantly.  Or the company that’s performing like gangbusters today could hit a slump tomorrow, leading to layoffs.
  • Consider other income streams.  There’s a reason the personal finance world talks a lot about side hustles.  Multiple streams of income = diversification.
  • Work hard, but remember work isn’t everything.  You are replaceable in your job.  Really.  You are.  If you lost your job today, would you lose your entire sense of identity?  If so, it may be time to reacquaint yourself with your friends, family, and hobbies.

Any other suggestions on how to weather the ups and downs of crazy employment situations?

I’ve Always Saved for a Rainy Day. Time to Break Out the Umbrella

The Backstory

Corporate machinations have been in full swing at Mr. FIREDup’s workplace for several months.  Senior leadership changed at the end of last year.  His director left as a result, and in January of this year a perky, up-and-coming new director was hired from another company.

He was excited to see what perspective the new director would bring.  Unfortunately things quickly went sideways.  The new director was displeased with the work he was producing.  It’s not clear to me exactly what went wrong.  Did the new director’s creative direction not align with my husband’s?  (The creative world is more nebulous than my world of numbers and spreadsheets).  Did his personality rub her the wrong way?  Did someone at a higher level have it out for him?  Was he a pawn in a power struggle?  Whatever the cause, my husband was coming out on the losing end.  He was miserable.

It got bad enough that one day in February I told him, “It’s okay if you have to walk out one day and not come back.”  (This is a pretty out of character thing for me to say.)  By the end of that month, we knew there was a realistic probability that he might be asked to leave.

A Blessing in Disguise

Things had gotten better recently.  Until yesterday, when I got a text from my husband saying he had been fired.

A range of feelings consumed me:

  • Anger.  Not because he was fired, but because he had not been treated with  decency and respect by his employer.
  • Empathy.  This type of experience takes an emotional toll.  I was worried how my husband was feeling about all of it.
  • Relief.  This feeling came to me later in the evening.  This job was never a great fit for my husband.  It’s probably a blessing in disguise that he was asked to leave, because I truly believe there is something out there that is a better fit for his talents and skills.
  • Gratitude.  I am thankful that we have had the means to save for a rainy day.  I wasn’t consumed with financial worry when I heard the news.  Because we have been living below our means for a long time, we have adequate emergency funds we can tap into if needed.  For the short term, few financial adjustments will need to be made.

But I also don’t want to be tied to a job because it pays a lot, or have to work on someone else’s schedule for the next 25 years.  Companies get acquired, managers move on, job responsibilities shift, and sometimes great jobs become stifling or downright horrific.  Financial freedom means that either I or my husband can choose to quit a job if one of us lands in a bad work situation; or that we can weather the storm if one of us gets laid off.  Working towards a financial freedom goal also means that we will have the flexibility to shift careers, work part-time, take a sabbatical from paid work, or start a business.

Contingency Planning

Because we knew this situation could be happening to us, I had already done some contingency planning in my head.  What financial moves do we we make now and down the road, until new employment is found?

  • My husband will file for unemployment.  (Spoiler: it’s not a lot, basically enough to cover daycare.)
  • I will add my husband to my health insurance.
  • We can tap the emergency funds if needed.
  • If necessary, we can reduce my retirement savings to the minimum required to get the company match, freeing up much more of my paycheck to flow to the bottom line.  (This is not a change I am planning to make immediately.)
  • My husband can pick up freelance work.
  • We can take our daughter out of daycare.  My husband could become a semi-permanent stay-at-home parent if necessary.  Dropping the monthly daycare expense would free up a ton of cash flow.  We love our daycare, so this is not something we would consider until other options had been exhausted.

I have always been the primary breadwinner in our family, so luckily this job loss doesn’t equate to us losing half (or more!) of our household income.  And honestly, if we can’t figure out a way to live on my income for a while, then someone should probably revoke my financial blogger status; even with just my income, we still make more than the median income for our area.

Conclusion

The pursuit of financial independence isn’t just about being able to retire early.  It’s about being able to weather the storms that life rains down on you along the way.

Would you be prepared if someone in your household lost their job?  What other financial moves should we be making in the meantime?

 

 

Friday Gratitude

Today’s theme: Work and Money!

We just got done with the performance review cycle I’m a part of at work.  Reviews are always interesting.  Some people are happy, some people are upset, some people are excited about their raises and others are pissed off.   (One of my coworkers refused to look at the company-wide communication about executive promotions, knowing it would just make her mad.)

This was a pretty middling year for me.  No promotion, no outstanding performance rating, a standard meager raise.  But I’m focusing on gratitude as this week comes to a close, for several reasons:

  • I have some things up in the air in terms of the future of my job, and I think that’s been causing some underlying stress for a while.  I brought up the uncertainty in my review, and received some assurances that my time will be redeployed to other projects if business needs change.  There are, of course, no guarantees in the corporate world, but it did allay some fears.  I am grateful for a good boss who recognizes my skill and understands where I can provide value.
  • Though my raise was one of the smallest ones I’ve received at this company, guess what?  It’s still a raise!  And since I make more than I did early in my career, that smaller percentage is still a larger dollar value than many raises received in years past.  So I am grateful for a slightly larger paycheck.  I don’t want to take for granted the add to our household’s bottom line.
  • Laurie’s post came across my Twitter feed at exactly the right time this week – it reminded me to bank my raise!  I immediately increased the portion of my paycheck directed to savings and also set up a (VERY) small monthly transfer to our brokerage account.  I am grateful to have discretionary income to save and invest.
  • It’s really easy at review time to get caught up in how we compare to others. Did I get a better review? Did I get a better raise?  Does everyone else make more than me?  Comparison is the thief of joy.  If I step back for a minute, I am reminded that I make a pretty good salary, AND I have a very good work-life balance to go along with it.

What are you grateful for this weekend?

Q1 Goals Update!

At the end of last year I set some goals for 2018.  Here’s where things stand as of the end of Q1!

Financial

Max out 401(k).  On track!  I adjusted the % of each paycheck I put towards my 401(k) at the beginning of the year to tie to the 2018 limit.

Make 2017 IRA contribution (amount TBD).  Done!  I made a contribution in February as I was completing our tax return for the year.

Finalize will. Not yet complete.  We were supposed to sign the paperwork earlier this month, but got derailed by having to stay at home with a sick kiddo.  This should happen in April.

Fund 25% of Financial Freedom goal for non-retirement funds.  I put part of our tax refund in our brokerage account, so as of today we’ve funded 23% of the financial freedom goal for non-retirement accounts.  I’m pretty happy with this percentage, given the ups and downs we’ve had in the markets recently.

Minimalism/Simplicity

12 Items in 2018.  I wrote a post in February about limiting my clothing related purchases to 12 or less items this year.  As of today, I’ve purchased one item – a pair of jeans.  I work in a business casual environment and wear jeans about 95% of the time.

Blogging

Average one post per week.  This is on track year-to-date, but it may be difficult to maintain for the full year.  Work is getting busier, and I’ve got a maniac toddler running around.  Also, my experience of blogging thus far is that inspiration doesn’t come on a regular schedule.  I don’t want to feel forced into writing something if I don’t feel interested or inspired about the idea.  Hobbies are supposed to be FUN, right?!

Share quarterly updates on progress against the Financial Freedom goal.  

Here’s where things stand as of today.  We are a whopping 1% CLOSER to our goal compared to when I wrote the original post in December!  I guess with the swings in the overall market (and my company’s stock price – I own some shares in my 401k/employee stock purchase plan) I should be happy that any progress has been made.
Capture

Stretch Goals

Attend FINCON 2018.  This is unlikely to happen this year, but I’m not going to take it off the list yet.

Get 2nd mortgage balance below $10,000.  I realllllly hate this loan.  I’m throwing a few extra dollars at it every month, but there are too many other places that our money is going right now to make this a priority this year.  I’m hoping maybe I can throw a few bigger chunks of money at it as the year goes on.

How are you doing against your goals for the year?

Is Family Support a Part of Your FIRE Plans?

Last week I listened to Sylvia’s story on the FIRE Drill Podcast.  Sylvia is a lawyer who has already hit her financial independence number, but is working for a few more years so that she has the flexibility to provide financial support to family members after she retires.

I’ve seen plenty of discussion in the personal finance world about parents providing economic aid to their grown children. But the opposite scenario – wanting to help parents or siblings – is not something I’ve seen covered much in the FIRE community.  Is Sylvia somewhat unique, or are there others who want to have the flexibility to do the same?

This episode hit home for me.  I do not worry about my husband’s parents’ financial situation; his dad is living comfortably on a railroad retirement pension, and I believe his mom’s husband will have a pension when he retires in the next couple of years as well.  But my family is a different story.

My Family Story

I grew up in a rural area.  My dad was a farmer and my mom stayed at home.  When I was ten my mom, a nurse, went back to work part-time.  There aren’t a lot of job opportunities in the immediate area.  She could have chosen to commute an hour to a larger city where she could work 12-hour shifts and earn more money.  But it was important to her to have the flexibility to be close to home for our after-school activities.

At some point my mom went back to work full time, while my dad continued to farm.  In addition to farming, my dad also took on side jobs, including selling seed and appraising and selling real estate.  My parents always worked hard, but the hard work did not result in lucrative financial gains.

Twelve years ago, my dad died unexpectedly.  He had life insurance and his affairs were kept in good order.  But there was still a financial impact.  My mom sold off some of the farm equipment, but there were loans against the farm from the lean years that needed to be paid down.

I am thankful that my mom had been working for many years by this point so she didn’t have to worry about finding a job.  But despite being at the same employer for coming up on 30 years, she still does not get paid a high wage.  Though she manages her money well, there just isn’t a lot of it to go around.  And maintaining a home and farm occasionally requires significant outlays of cash.

My Philosophy on Family Support

Honestly, I do worry about my mom’s financial situation.  So when I have an opportunity to help in small ways, I do so.  My brother and I both went to college, then moved to large cities and got jobs that pay substantially more than any jobs in the area where we grew up.  So we have the luxury of being able to pay for things that are a small burden to us but a much larger burden for her.  For example, we bought her a new washer and dryer two years ago for Christmas.

There has never been an expectation that we provide things for my mom.  And my mom is not the kind of person who would ever take advantage of us for financial gain, either.  But she has always been a great mom, and a role model for hard work and sacrifice.  Why wouldn’t we share our financial abundance when it makes sense to do so?

While providing family support is not an explicit part of our FI journey, having extra money to help my mom whenever it’s needed is definitely a consideration in our long-term financial decision making.

Caveats

I do think there are some rules to abide by when it comes to sharing your financial resources with family, whether it is a child or a parent or another family member:

  • Take care of yourself first.  Sylvia referred to this as the airplane method: you can’t help someone else if you don’t take care of yourself first.  Make sure your own financial house is in order before you offer to help family.
  • Only provide money or resources willingly, not out of forced obligation.  My mom would never have an expectation that we “give” her things, but others may have a different family dynamic.  Providing money without creating a cycle of dependence can be tricky.
  • Be cautious in loaning money.  I have never loaned money, but if I were in that situation, I would treat it as a gift so as not to create resentment should the money not be paid back.
  • Consider non-monetary gifts.  Sylvia mentioned that she shares frequent flier miles with her family.  I think this is a great idea!  My mom said Hawaii is the one place she really wants to visit, so in the next few years we are planning to do a trip there – and I plan for us to pay for most, if not all, of the trip on her behalf.

I’m really curious to get feedback from others on this topic.  Do you have family support as part of your FIRE plan?  If so, how do you plan to do so?  

Liebster Awards!

What is a Liebster Award, you may ask?  It is a way to recognize and discover new bloggers.  I want to give a shout out to Sarah at Ditching Your Desk for nominating FIREDup for a Liebster Award recently!  From one new blogger to another, it means a lot to know there are others out there who are on a similar journey.

To get to know the Leibster nominees a little more, Ditching Your Desk put together a list of questions for us to answer…

Why did you start your blog? 

I’ve gotten more interested in the FIRE/personal finance community in the past couple of years and wanted a way to get more involved in it.  Also, I love finance and writing, so it made sense to finally have a space of my own where I could share my family’s journey.  It also keeps me accountable to my goals.

What gets you up in the morning?

Coffee!! 🙂  Seriously though, in addition to the thought of breakfast and coffee (I’m always thinking about food), I get excited to spend time with my daughter and husband (and my pug dog).

Describe your perfect day.

My perfect day would involve most (or all) of the following:  a good night’s sleep, coffee, delicious food, quality time with my family (and friends), outdoor time/exercise, and some time to read.  Bonus points if the day involves an adventure, whether locally (like a visit to the zoo) or on a vacation.  If the evening involved a date with my husband and a glass of wine or a cocktail, that’d be pretty great, too.

What have you found to be the best thing about starting a blog?

The personal finance community in general is very positive and welcoming.  I feel like a bigger part of it now that I have my own blog.  It has also been a great way to get more writing under my belt, which is something I enjoy doing.

What have you found to be the worst thing?

Despite the fact that I created the blog as a creative outlet and not a business venture, I sometimes feel guilty that I don’t spend enough time on it.  That kind of takes the fun out of it.

What is one thing most people don’t know about you?

I am late to being a mom and for many years actually didn’t think motherhood was in my life plan.  In fact, I was a little scared that I would be one of those moms you read about on the Internet who says she hates being a parent.

I’ve actually found the opposite to be true.  I am so crazy about my daughter!  I was pretty satisfied with my pre-kid life.  But now that I’ve experienced being a mom, I can’t imagine not having her in my life.

Where is the best place you’ve visited?

In the summer of 2013 I went on an epic trip with my best friend, who at the time was in the Air Force and stationed in Germany.  I flew to Germany to meet up with her, then we traveled to Istanbul, Turkey and a few different cities in Italy.  It was fantastic!

Where do you dream of traveling?

It might be easier to list where I don’t want to travel!  I imagine there are more places I’d like to see than I’ll ever get a chance to visit in my lifetime.  Australia/New Zealand, an African safari, Thailand, and Bora Bora are just a few fun ideas.  There are also many amazing places within the United States to explore.  I would like to visit some of the best National Parks when my daughter is a little older.

What is your favorite book?

I enjoy reading.  I don’t have a specific favorite book, but I’ve read some good ones this year, including The Bear and the Nightingale, What Alice Forgot, Heartburn, and At Home in the World.  They are all very different books but I enjoyed each of them.

What do you want to be in your next life (figuratively speaking)?

I’ve worked long enough in cubicle land to say it would probably not involve staring at beige walls all day while hunched over a computer.  Writer?  Teacher or professor?  Librarian?  Financial planner?  Personal trainer? Yoga guru?  Entrepreneur?  Who knows.  But in my next life I’d also like to be a wife and mom and daughter and friend.

Who is your favorite musician or band?

The Avett Brothers!

A Few Suggestions…

Go check out Ditching Your Desk if you’re looking for new blogs to follow!

A few other newer blogs I suggest checking out as well:

Lean Fire ATL – LeanfireATL is a GenX early 50’s chick’s blog about the journey to FIRE through spending, saving and investing.

Women Who MoneyWomen who Money is a collaborative blog created to provide trustworthy personal finance information for women.

Birds of a FIREOlivia is a 25 year old FIRE blogger living in New York City.

Financial Pilgrimage – A St. Louis family who is on a journey to pay off nearly $200,000 in debt since 2011.

Readers – any suggestions of other new blogs everyone should check out?

Friday’s Frugal Five!

Happy Friday!  Here’s a peek into five money-related moments from my past week.

  1.  Last Friday I texted my friend to wish her a happy 40th!  She had won free tickets to a concert that night, and plans with another friend fell through, so she offered me her extra ticket.  Normally I would have found excuses not to go, but the last minute nature of the invite worked in our favor this time.  As a plus I got to spend quality time catching up with a friend I haven’t seen much since my daughter was born.
  2. I changed the way I’m handling dependent care flex reimbursements this year.  Our current daycare sends monthly invoices, which I submit for reimbursement as soon as they are received.  The daycare cost is significantly(!) more than what’s being deposited in my flex account each month, so our claims submission process is smart enough to know to cut me a check after each paycheck, when the new deduction has been placed in my flex account.  It doesn’t change the amount I receive back from my flex account, but it does ensure consistent cash flow every two weeks.
  3. Due to an unfortunate incident my trusty old Kindle died on Monday.  It wasn’t ‘frugal’ to buy a new one, but I love to read, and use Overdrive through our local library to check out e-books all the time.  Since I borrow almost all books I read instead of buying them, I should recoup the cost of the Kindle before the end of the year.  
  4. We spent at least $25 less than average on our grocery store trip last weekend.  I’m not sure what we did that made it so efficient, but I need to try to recreate it!  I think we did have some efficiencies from meal components that overlapped.  For example, I made homemade meatballs on Sunday, then we used them for two separate meals (spaghetti and meatball subs).
  5. Our tax refunds have already been squirreled away!  None of it is being spent at this time; there are things going on behind the scenes here that suggest this is the most prudent option at this time (more on this in an upcoming post).  Part of it went to beef up our online savings account (the 1st tier, super liquid emergency fund) and part of it went into the brokerage account (the 2nd tier emergency fund).

What were your big money moments from the past week?

Don’t Wish it Away

This time last year I was on maternity leave with my newborn.  I am so happy I took the full twelve weeks off to be at home with my baby, but I’d be lying if I said the time was pure joyful bliss.  Adjusting to a tiny human who needs constant care and attention was not easy for me.  I would ask my friend Google:  “When do babies get easier?”  Sometimes I found myself wishing the time to move a little faster, to jump ahead to a time where this parenting thing got easier.

Then I went back to work.  Time began moving rapidly.  My daughter started rolling over.  I thought, “This is fun! I like this stage.”  Then she began sitting up.  That was fun, too.  She started eating solid foods and sitting in her high chair with us at mealtime.  The first time she crawled was so exciting.  Now she is a toddler and working on walking and talking and so many other awesome things.

That “hurry it up” mentality from the newborn days?  It diminishes more and more with each passing month.  Each developmental stage is passing so quickly and my husband and I are trying to truly experience and enjoy each moment while we are in it.

“Life is a journey, not a destination.”

― Ralph Waldo Emerson

What does this have to do with Financial Independence?

It’s easy to have a “hurry it up” mentality about financial independence, too.  For many (including us), it’s a goal that is several years away – if not a decade or more.  Sometimes it’s a struggle for me not to wish away today, anticipating some “magical” future time when we will reach our financial freedom goal.

But each of us only gets one life to live, and we don’t know how long it will last, or what detours our path will take.  The thing I’m working on is how to enjoy TODAY, while still making conscious financial decisions that benefit our tomorrow, too.

How do you enjoy the present when FIRE is such a long-term goal?

Friday’s Frugal Five, Tax Edition: Five Ways We Minimized Our Tax Bill

I filed our taxes this week!  Yes, I’m a super nerd who enjoys plotting and scheming and figuring out my deductions.  And we usually get our taxes done early so we can sock away our tax refund.

In the personal finance community, there is a lot of this:

“You don’t want a tax refund!  Don’t give an interest-free loan to the government!”

I get that.  It’s a logical argument.  But I’m firmly in the “I enjoy getting a refund” camp, for a couple of reasons.

  1. The money that I’m getting in my refund probably wouldn’t have been invested anyway; it would have been squirreled away to my emergency fund, which is a high-interest savings account.  I’m not exactly earning lots of dollar bills on that.
  2. There is a psychological boost that comes with getting a small chunk of ‘extra’ money.  It’s a way to put a significant dent in a loan, set aside funds for a house improvement or family vacation, or replenish an emergency fund.  (We don’t spend our refunds frivolously; for someone who would be tempted to do so, a refund might not be the greatest idea.)

Here are five ways we minimized our tax bill for 2017:

  1. We contributed to tax-advantaged retirement accounts.
    • The hubby and I both contribute to 401(k)s at work.  We didn’t max them out in 2017, but we definitely contributed more than either of us ever had in the past.  (My goal is to max mine out this year!)  This money was all contributed pre-tax.
    • If you have a 401(k) at work, you can still deduct a contribution to a traditional IRA if you meet certain income limits. I wasn’t sure exactly where our modified adjusted gross income (MAGI) would land in 2017, so I waited until tax time to do the analysis.  I ended up making a partial contribution for the 2017 tax year, and funded it as I filed my taxes.  I’ll use the refund money to replenish the funds I put in the IRA.  Plus, the IRA contribution reduced our taxable income even more, leading to a bigger refund!
  2. We used FSA and HSA accounts.
    • Since I had our daughter last year I knew that I would have to pay quite a bit of out of pocket expenses against our medical plan, so I maxed out my flexible spending account (FSA) at work.  FSA contributions are free from Medicare/Social Security, federal, and state taxes!  The caveat is that FSA money is “use it or lose it” – so you have to be certain you will use up the funds in the year you contribute them (there is also a small grace period to use up FSA money the following year).
    • I don’t have a Health Savings Account (HSA) at work, but my husband does.  HSAs are used in conjunction with high deductible health plans.  This money is also pre-tax and the best thing about an HSA is that the money is portable.  You can take it with you if you leave!
  3. I contributed to a Dependent Care FSA.
    • If your employer offers it, you can fund a dependent care FSA up to $5,000 a year.  Dependent care FSA contributions are also free from Medicare/Social Security, federal, and state taxes.  When you factor in our marginal tax rates, this income would otherwise be taxed at nearly 39% – so this is a ton of tax savings.  You need every little bit when you pay as much for daycare as we do!
    • If your employer doesn’t offer a DCFSA, you may be able to claim the dependent care tax deduction.  You can’t double dip on this with the FSA, but if you have more than one child you may be able to claim costs that are above the $5,000 DCFSA limit.
  4. We itemized our deductions.
    • We used some of the common deductions – property taxes, mortgage interest, and charitable contributions – to itemize rather than take the standard deduction.  The larger the deduction, the smaller the taxable income, which means a smaller tax bill.  With the tax reform changes, 2017 is probably the last year for the foreseeable future that we’ll be able to itemize.
  5. We received the child tax credit.
    • Really there isn’t anything to do to claim this credit other than have a kid.  But there is an income limit on it, so by utilizing some of the options listed above, we reduced our MAGI enough to ensure that we got the full $1,000 credit.  The best thing is that a tax CREDIT is a dollar for dollar reduction to your tax bill.  (FYI: the income limits for the child tax credit have increased significantly for 2018 with the tax reform, so more earners with kids will be eligible for this credit.)

Do you enjoy or dread doing taxes?  What did you do in 2017 to reduce your tax liability?

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