Just a Reminder About Tax Day

With April 15th just around the corner, about half the country is preparing for and anticipating a large return. How large? The average so far this year is estimated at just over $3000. That comes out to $250/month. That's a lot of money that could otherwise be working for you and your goals every month. So how does this happen year after year? Think about it for a minute. Why would you want to purposely loan your hard earned money (interest free no less) to an entity as pathetically inefficient as the US Government? It makes no sense. Don't get me wrong, it's great to receive a large lump sum. The problem is many see it as free money to splurge and spend on things they want. Instead you should remember it's your money that you overpaid in the first place. I would suggest people do this for a few reasons: out of habit, a lack of knowledge and/or lack of financial discipline.
What should you do if you find yourself in this predicament? First find out why. If it is the first two reasons I listed then, it could be as simple as going to you HR manager and raise the number of withholdings on your W-4. I find the majority of people don't know how to accurately calculate right number for your situation. The IRS actually has a calculator online to help. Get started here. The simplified version is that the right number for you is calculated by several things including the number of dependents you claim, your tax bracket and how much you already withhold. Your tax adviser is also a wonderful resource to help you calculate this. Be sure to update this from year to year as your life changes.
If your reasoning is a lack of financial discipline or planning, then you have bigger problems. It's not a math problem, it's a behavior problem. Tell-tale signs include: using your tax return to bale you out of the debt created the rest of the year, failing to use the word 'no' often enough to you or your children, not working together with your spouse on financial goals, and not living within your means. All of these point to not having and/or following a budget. My warning if you find yourself in this group? Don't just fix the numbers unless and until you have the planning to back up what to do with that money as it comes to you throughout the year. Otherwise, you will have nothing to show for it and no large tax return coming. Remember, personal finance is neither perfect, nor constant. The trick is to keep reaching for your goals, even if you are derailed temporarily.

Quotations of the Month: Fall

"On the path that leads to growth, the only things that will ever stand between you and the success you seek, is you." Joe Mechlinski

"The only way to make sense out of change is to plunge into it, move with it, and join the dance." Alan Watts

"Courage is the discovery you may not win, and trying when you know you can fail." Tom Krause