My quarterly tax payment was bigger than my old monthly salary

I was doing my books yesterday and saw I owed $8,400 for this quarter's estimated taxes. That number stopped me cold because it's more than I used to make in a month at my old office job. It took me a minute to realize that's a good problem to have, but it also means I need to be way more careful about setting money aside. How do you all handle the mental shift when your freelance income gets to this point?

3 comments

3 Comments

grantw417d ago

First time I saw a tax bill over five figures I nearly choked. My old salary was 45k a year. I opened a separate high yield savings account just for taxes. Every client payment, I transfer 30% straight in there before I even think about it. It's not my money, it's the IRS's money. That mental separation is the only thing that works.

mark_chen627d ago

Yeah that mental separation is key, I mean it's like a basic life skill they never teach you. I see people get wrecked because they treat all the money in their account as free to spend, then panic when bills come due. It's not just taxes, it's like rent or car payments too. Setting that money aside immediately tricks your brain into working with what's actually left over. Maybe it's just me but once you start doing it for one thing, you start doing it for everything.

harperr827d ago

Actually, it's closer to 40% for most.