TWO SURE THINGS

Mark J. (NDD#102) (33 Posts)

Mark was born and raised in Fayetteville, WV. He first visited Disney World back in 1975 and was instantly hooked. He returned several times as a child and now brings his own family as often as possible. Being a new lawyer, however, that isn't as often as he'd like. Mark is married to Sherri, NDM#237.


It’s said that the only sure things in life are death and taxes. Since these two unpleasant realities are unavoidable, why not deal with them in a way that helps you financially?At this time of year, many people are looking at their taxes and expenditures from the previous year. You might also take this opportunity to see if there are any changes you might make for 2011 that will free up more money to save for all things Disney.

I’d like to share with you a couple of major changes my family made in our finances that gave us several hundred more dollars a year for our savings and investments, including our savings for our Disney vacations. These tips may or may not work for you. Please consult your accountant or a financial planner before trying them yourself. This is merely what worked for one family.

The first place to look for some extra money is in your income tax withholding. Now, I’m not talking about having the maximum deductions taken out of your paycheck so that you get a big refund this time every year. Many people do that. It’s how my parents saved for our vacations and I’ve heard a lot of my co-workers discussing how they have their taxes taken out at the “Single with zero exemptions” rate even though they’re married with four exemptions in order to get the big refund. But consider this. . . by doing that, you’re essentially giving Uncle Sam an interest-free loan of your money for the time the government holds it. Shouldn’t you be getting the interest?

I strive every year to get my income tax withholdings as close to the actual amount I’ll end up owing as possible and, consequently, to get the smallest possible tax refund each year. This frees up extra take-home pay that I can then invest. For example, suppose my family of four (with both spouses working) had our taxes withheld at the “Single with zero” rate, and got a $3,500 refund at the end of the year. If we could adjust our withholding so that we only got a $500 refund, that would result in $3,000 a year more take-home pay for us. That’s $250 a month! Now, this isn’t “extra” money, because you won’t get a big tax refund. And it will only help you fund your Disney addiction if you take the money and invest it, for example, in a short-term CD or online interest-bearing account. But $3,000 invested at even a modest 5% return gives you roughly an extra $150 per year. That’s a night in a Value Resort, an hour of boating on Seven Seas Lagoon, or a nice table-service dinner.

If you are currently having large tax withholdings taken out of your paycheck and are considering trying this strategy, I’d urge you to start easy. You don’t want to get stuck at tax time owing the IRS $1,000! For example, if both spouses in a family of four are currently having their taxes taken out at the “Single with zero exemptions” rate, you might start off by adjusting your withholding to “Married with one exemption” for each spouse. Compare the difference in the amount of income tax withheld from your last paycheck. Multiply your new amount of withholding by the amount of paychecks per year to make sure you’re still having something close to last year’s tax bill taken out. And make sure to save the difference in your take-home pay!

While we can’t avoid death, we do plan for the loss of income it entails through our life insurance. You can free up more money for savings by switching from a “whole” life insurance policy (the kind that keeps the same premium as long as you have the insurance and typically allows you to borrow against it) to a “term” life insurance policy. Term policies, as the name implies, are for a set number of years. You’ll pay much lower premiums as you’re younger and then, as the term expires and you renew for another term, your premium will go up. However, if you’re also saving for your retirement in an IRA, 401(k) plan or the like, during the policy’s term you will build up enough savings so that you’ll not need as much insurance coverage after the term expires. The idea is that as you get older, you’re able to steadily reduce the amount of coverage required as your retirement savings go up and your financial needs go down (through children growing up, the mortgage being paid down, etc.).

When my wife and I first got married, she had a whole life insurance policy of $50,000, for which she paid something like $35 a month in premiums. We switched her over to a 15-year term policy of $150,000 and her premiums are now $16 per month. So we were able to triple her coverage while cutting her premiums by over half! That 15-year term policy expires next year. We’ll have to get another term policy and now that she’s older (but doesn’t look any older!), her premiums will go up. But, on the other hand, she’s built up thousands of dollars in her IRA, we’ve paid down a lot of the mortgage, and our daughter is almost grown up. Therefore, we’ll need much less coverage than we did when we first got married. In the mean time, we freed up about $20 a month, or $240 a year to invest. Again, $240 isn’t a fortune, but that would more than cover a lunch at Cinderella’s Royal Table for the four of us.

These are just a couple of changes we’ve made to our family’s finances in order to get more income to invest. I urge you look at your own family’s finances, with the help of a financial planner, and to see if there are changes you, too, can make to fund your Disney Driven Life.

Contributed by: Mark Jeffries (NDD#102) Mark is the DDL Finance Blogger.

Mark J. (NDD#102)

Mark was born and raised in Fayetteville, WV. He first visited Disney World back in 1975 and was instantly hooked. He returned several times as a child and now brings his own family as often as possible. Being a new lawyer, however, that isn't as often as he'd like. Mark is married to Sherri, NDM#237.

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