31 Debt Free Missions: Adjust Your Withholdings (2024)

Tips like thesehelped us pay off $127K in debt. You can read our story inSlaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After.

Welcome to 31 Debt Free Missions! A new feature this year on Queen of Free, during each day in January, I will provide 31 concrete missions or challenges for you to take on to #SlayDebt and take charge of your finances this year. Each mission will take you less than an hour (some will only require 15 minutes). Whereas, 31 Days to Kick Debt in the Teeth (which I’m reworking this year and reposting in January, too) focused on some of the philosophical changes you need to make in order to be successful with money, 31 Debt Free Missions are action steps to put into place after you have your thinking straight. Even better, during the month of January, I’m revisiting each of these challenges in order to sharpen my money saving and debt slaying skills.

Are you ready? Your mission is as follows:

When we began paying off debt this was the very first step we took. Honestly, it was a little more scary for me than I thought it would be. We had always received a tax refund and I kind of looked forward to the event like it was a holiday. I knew we could pick up a few of the items we had been wanting to purchase or have some extra cash to help stop our bleeding budget. I wasn’t even sure that you were able to not get a tax refund (taxes and insurance can confuse the tar out of me and I have to have the same things explained to me again and again). However, after the King of Free convinced me it was doable and ok, we adjusted the withholdings from our paychecks. Want to know why? Read on.

I’ve often heard Dave Ramsey quip that getting a yearly refund is like giving the government an interest free loan of your money. It really is true. Adjusting your withholdings will give you a little bit of breathing room and margin in your household budget. The key is to not live on any of that money, but instead apply it toward paying off debt. The power comes from being able tosock away at the debt dragon without too many changes to your household budget (those come later on). After adjusting our withholdings back in 2008, we had about $100 per month to smack the dragon in the mouth. For those of you playing along at home 48 months times $100 does not = $127K so you’ll have to make other changes, too (many of which I share in the book). The momentum of just a little bit ofextramoneyper month gives you an addictive success that fuels you to move in other ways, too.

Ok, so once you’ve made the decision to adjust your withholdings, you need to take an action step. It shouldn’t take very long at all (remember all of the Debt Free Missions are an hour or less). You need to talk to your HR department or office manager (whoever is in charge of tax matters at your employer) about changing what you currently withhold. You will need to ask for a W-4 form and fill it out.

• Your office manager or HR person may tell you that you can’t do this or it’s not a good idea or that it’s not ok. Be prepared for that but stand firm in your choice. I assure you, we livedthis way throughout slaying the debt dragon and continue to do the same now.

• You don’t want to adjust to the point of owing the government. You’ve still got to pay your taxes, friends. You can use the IRS Withholding Calculator to get a good estimate. We’re self employed now so it works different. We set aside money for taxes and are really good at calculating our tax liability. Last year we had a very small federal refund and had to pay the state $5.

• You won’t have a tax refund next year. Here’s the deal. That refund you receive is not a bonus or a special treat from Uncle Sam. It’s your money. So sure you can choose to get it all at once after your taxes are filed or you can get it spread out over the year and use it as needed. It just makes sense to incorporate it into your household income. And again, for us it provided money when it seemed like there was no extra money to put toward debt.

• FULL DISCLAIMER: I am NOT a tax professional (Here’s ours). You need to run everything through your accountant or tax adviser before making a decision. I’m simply sharing what has worked for us and everyone’s employer/occupation/tax situation is different.

• Do not and I mean DO NOT incorporate this extra “found” money into your checking account without purpose. I promise you it will vanish into thin air. You must set it aside to put toward an emergency fund, debt, or another savings goal.

Now that you’ve received your mission, DO SOMETHING ABOUT IT. Also, if you want to be sure you don’t miss a single update in this series, go ahead and subscribe! Updates will come to your inbox everyday at 5 PM.

Miss yesterday’s first post? Read:31 Debt Free Missions: The Restaurant Challenge.

My book is now available:Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After.You can also check outInspiration to Pay Off Debt: 30 Days of Encouragement from the Queen of Freeon Kindle.

This post contains an affiliate link. That means when you get a great deal or maybe even something for free, you also help our family pay off our mortgage early. And for that, we royally thank you!