Tax Refunds Are Bad For The Economy

Posted on February 4, 2012 Written by Leave a Comment

So you say you’re getting a tax refund this year?  Isn’t that delightful.  Now you’ll have “extra” money with which you can do whatever you like.  Most likely you’ll consider it a bonus of sorts and it will be spent on some sort of vacation, gambling binge, or electronic upgrade.  Am I close?  That’s what most people do, right?  So why should you be any different?

If you’re like millions of Americans who over-pay their taxes, you might be getting some of that money back!  Wheeeee!  So what should you do with that “extra” money?

First things first.  Recognize that it’s not extra money.  This is money that you loaned to the government interest free.  It’s hard-earned income that should be in your hands, not the government’s hands.  You do work hard don’t you?  You do want your money to be in your pocket right?  Then stop giving it to the government in advance.

Getting money back at the end of the year is not an indication that you’re winning with money.  It’s not a barometer that measures success.  It’s a tell tale sign that you aren’t doing the right thing with your money and that something needs to change.

If you’re getting a refund, you’re doing something wrong.  And, some companies are helping you continue this trend.

Some tax preparation companies build their entire business models on the fact that you might be entitled to a refund from the government.  They sell you on the fact that they can help you get more, and then they help you think about ways you can spend that money.  Then, you buy into their marketing with some of your refund as a fee to make sure you’re getting as much of a refund as possible.

For the average family living paycheck to paycheck, a $3000.00 refund, for example, might seem like an annual treat.  But if you divide that number by 12, you get $250.00 per month in additional income with which to budget.  When given large refunds, people tend to spend that money in their heads on big, extravagant purchases to satiate their desire for some sort of relief from the monthly grind without realizing that they could have had more wiggle room every month.

Can’t save up that emergency fund?  Need that deductible for unexpected insurance gotchas?  Need a bit extra every month to pay down debt?  You know where to find it.

“But if I don’t pay in, I might owe…”

Yep.  That’s true, you might, but if you plan for it, and save for it, it won’t be a problem, will it?  The optimal plan puts you at zero owed, zero paid back at the end of the year.  It’s hard to nail that right on the nose, but personally, I’d rather owe, have complete control over the money, and not give it to the government.  If it sits in my account, I earn the interest on it.

“It’s like a savings account…”

I hear this from people who don’t have the discipline to save and don’t understand the amazing power of compound interest, which Albert Einstein once declared to be “the most powerful force in the universe.”  Those same people struggle to make their monthly expenses and don’t even realize they could have more breathing room, pay off debt faster, or save for a specific goal.  I’ve heard out of the mouths of people who are getting refunds that they “aren’t able to save $1000.00,” that it’s “just not realistic.”  Oh really?  If you’re okay with your employer automatically sending your “savings” to the government, why not just adjust your W4 so you get more of your paycheck, then setup an automated transfer into a savings account.  Label that savings account “Tax Savings” and leave it alone.

Bottom line?  You are in control of how much money your employer withholds from your paycheck when it comes to Federal and State taxes.  Social Security?  Not so much.  (Man am I fired up about that one!)  If this year you get a big refund, adjust your W2 so that your employer reduces the amount they withhold by the amount of your previous year’s refund.  You should be in much better shape the following year.

 

 

Filed Under: Personal Finances Tagged: , , , ,

Face Your Personal Truth, Make a Plan

Posted on January 4, 2010 Written by Leave a Comment

My personal financial experience in life includes a history of ignoring the facts about where I stand financially, and nutritionally.  I have done what so many others do, relying on a predictable paycheck, and part of it was because I failed to recognize one important fact about earning an income.  We all work for ourselves, and we can all lose our job at any time.

Most people believe that finding a job means finding security.  When they secure a regular income, they shift to autopilot, and the habit creating behaviors begin to take root.  If we don’t pay attention to whether or not those behaviors are good or bad, we will find ourselves missing out on the opportunities, and letting things we wouldn’t want to be happening actually happen.

That’s the mindset of most people I hear complaining about their financial situation.  They believe that their circumstances “happened” to them.  That’s not true, because you are the sum total of all of the decisions you have made in your life, and you work for yourself, so the reality is that “you happened to you.”

Whether you are working for a big company, small company, or yourself, the fact remains that you are working for yourself in all circumstances.  You are an individual and you have the burden of educating yourself, finding employment, and managing every aspect of your future, including your finances.

Examine Your Habits

There’s no sense in pointing towards a horizon that your personal “boat” isn’t headed towards.  We all have this dream of where we’d like to be, but so many aren’t even headed in that direction, and they don’t realize it.  Take a good look around you, measure how you spend money for a while, discover how much waste there is in your life, or perhaps discover how little you allow yourself to have fun.  Write down what you spend.  Write down how you feel.  Write down what you eat.  Know the value of these behaviors.  Get a clear understanding of where you actually stand, and what direction you’re actually traveling. You can’t change the course of your life without knowing why you’re headed in the opposite direction you thought you were traveling, and you won’t know you need to change direction until you wake up and know that you are in control of your future.  It’s okay to discover these things.  There’s no shame in learning that you may be perpetually failing your own aspirations, because only you can make the decisions necessary to reach your goals and change your past behavior.

Make a Plan

Once your eyes have been opened to the truth of what’s going on in your financial life, you’ll find it much easier to make that financial plan.  You will have found the holes in your finances, and you will have plugged them, making your journey much more efficient.  You’ll be able to stop focusing on the “how” and “why” which are dis-empowering words, and begin to intentionally turn the wheel on your vessel to point in the right direction with intention.  With a clear understanding of where you’ve been and where you’re heading, you’ll be able to clear the foggy goggles and see the opportunities that wait for you, change direction, and begin traveling towards a more realistic goal.  Writing down the plan will change your outlook on your future and it will become more real, and you’ll have a much higher success rate when you begin to do that plan.

Do That Plan

Don’t worry if you don’t get it right the first time.  You’re not an expert planner, and you’re going to have to revise your plan until you’ve course-corrected in the right direction.  You’ve felt the emotions involved with facing the truths in your life, you’ve made some changes to prevent the same patterns, and you now have a plan to move forward.  Do that plan.  If you fail, or if you don’t reach your goal as fast as you planned, adjust the goal, but keep moving forward.  Keep focused on your goals, and do what your goals need you to do in order to meet them on the other side of the journey.  Stay in contact with them, and maintain your heading.  Don’t fall asleep at the wheel by avoiding facing the failures that accompany the journey.  You will fail.  It’s part of life, and anyone who tells you otherwise is lost.  Failure is what forces us to re-examine our written plan and reflect on our past behavior, and it’s what drives us to continue changing the plan until we reach the goal.  Before you know it, you will get good at planning, and you will be able to look back, and rather than thinking, “look what happened to me,” you’ll be able to say, “look how I happened to that!”

If you continue down a path that leads to nowhere, you’ll be nowhere.

Filed Under: Planning and Budgeting Tagged: , , ,

One Hundred Percent Frustration

Posted on September 8, 2009 Written by Leave a Comment

100_percent_override-782395Not sure how to place the emotions at times.  Do you ever feel like that; where your day begins with a cloud of uncertainty and a consciousness of excruciating despair that slowly creeps through your skin like Play-Doh through the scalp of a barber’s patron?  Those scissors never worked.

That’s how I feel right now.  And the only remedy that I have found to quell the stench of negative emotions is time, and the only meaningful thing that I can gather the energy to actually do during that time is write.  So I write about it.

If you’ve ever done a study on the night scene in Scottsdale, and probably the rest of the world, you’ll find that a vast majority of the patrons in the local bars are sales people who only earn a paycheck when they make a sale.  Lawn mowers, Caterpillars, Houses, Stocks, Bonds, Pools, whether it’s a legitimate product, or a total scam, the 100% sales person is the person you’ll find at the bar soaking his liver with the fast acting, anesthetizing libations.

At what cost?  Part of their commission, part of their financial future, part of their body, their soul, their spirit.  Who knows?!

What I know now, being a 100% sales commission entrepreneur with uncertain income and no cap on earning potential, is that it doesn’t mix well with Attention Deficit Disorder, which is what I’m coping with.

So what is the healthy response to my situation?  Should I be at a 9 to 5′er with the certainty that my day is planned out for me, as though that’s the case.  I think not.  Should I risk it all on a single idea?  No.  Should I sell my body for money?  Uh…wait, fat chance on that one.  There must be a solution.

All of this is predicated with the understanding that I currently am not on medication for my ailment.  My brain doesn’t have as much dopamine swimming around up there as others, which is akin to an engine not having enough oil to move smoothly, or a cyclist without hiney butter to keep things smooth.  Dopamine is the juice that helps the synapses fire off their signals.  It’s like the sprinkler for the golfer in a lightning storm.

Have you ever noticed that in life, when you discover a better or a “right” way of doing something, you’re soon confronted with actually having to do those things, which are usually very difficult?

Become a Christian and suddenly you become hyper-sensitive to what’s right and wrong.  Learn a better way of eating and suddenly letting go of the junk becomes harder.  Understand finances and how to become independently wealthy over time and suddenly you’re forced to make behavioral changes that feel as though they are upsetting the fabric of your comfort hammock.  Let love escape you, as though you had control over it anyway, and soon you feel like the world is crashing down around you, but only for a moment.

Emotions pass, but for someone whose synapses fire less often, emotional diversion and confusion cloud a large portion of my day, especially when nobody needs me for anything.  I feel at home when I’m needed because it distracts me from the confusion.

All this to say that being a REALTOR in a market where people batten down the hatches rather than expand their territory, where my income is dependent upon me, and me is distracted by just about everything imaginable, has revealed how much shit there is to deal with that a full time job tends to cover up.

I wonder how many people who go to the same job day after day after day, punching a clock and appeasing their supervisors, are actually using that time to escape the issues that they really need to confront, like the biggest fact of all:  I am here on this Earth, I am one person, and I am on my own, even though I’m surrounded by people who know me.

In the end, I believe that allowing myself to be pushed through this period in my life will strengthen me beyond what I can imagine.

“…just get back up when it knocks you down…”

Filed Under: Attention Deficit Disorder Tagged: , , , , , , , , , ,