W-4 Withholding Changes

I am changing my federal tax withholding so that I can keep more of my paycheck when I earn it. I am hoping to increase my net pay by about $100 per paycheck and put the money in to my savings. I do have to admit that the "forced savings" of a large tax return is nice and it came in especially handy this year to pay down my Discover card balance to zero. I will still get a federal refund of around $3,000 next year if I have calculated correctly. My state refund should again be in the $1,200 range. All in all, I should be able to have $200 more per month to save and still get total federal and state refunds of $4,200. That would be more than enough to pay off my car or my 401k loan next year.

Now that my credit card debt is almost gone I would like to focus more on my emergency cushion. My stretch goal is to have $15,000 of cash reserves by the end of 2008. I am not sure how achievable that goal is as I am on track to only have about $11,000 saved by the end of the year. If I get a bonus (which is a very big if) I would put 15% of it in my 401k and the rest in my savings. Supposing my bonus is $4,000, then an additional $600 would go into my 401k and about $2,000 after taxes would be available for savings. Last year my bonus was $7,000 but my firm had a very good year. I am not counting on a repeat 12% raise or a $7,000 bonus. My expectations are more in line with a 7% raise and if I am lucky, a $4,000 bonus.