My uncle told me to put 40% of every check aside for taxes and I thought he was nuts

Honestly, I used to just pay my bills and spend the rest, figuring I'd deal with taxes later. He's been a freelance photographer for 30 years and drilled that number into my head last January. I started doing it, putting $400 from a $1000 job right into a separate account. When I did my taxes this April, I had the money ready and even got a small refund. It saved me from a huge panic. Has anyone else had a family member give you a specific number that actually worked?

3 comments

3 Comments

piper_garcia232d ago

It's that same idea of paying yourself first, but for your future self who has to file taxes. People who are good with money always seem to have these little rules that sound crazy until you try them. My dad had a thing about always rounding up the grocery bill and saving the change. These tiny habits build up into real safety nets. Your uncle gave you a system, not just a number, and that's the part that actually works long term.

morgan_stone332d ago

But what if your tax rate is way lower than that, you just gave the government an interest free loan.

tessaw962d ago

Your uncle is spot on. I run my own business and 40% is the exact number I use too. It covers federal, state, and self employment tax without leaving you short. The trick is to move that money immediately so you never see it as spending cash. Setting up a separate savings account just for tax money makes it automatic.