Tuesday, February 26, 2013

Tax Refund: It's Fiscalicious


Because my original purpose with this blog was to write informative articles in an interesting way, and while my crazy ones about rumors and shrinkological disorders are probably more popular, I'm going to get serious for a second (sort of) and discuss money because it's tax refund time for people who have the pitter patter of little tax deductions running around their joint.

I have written many articles about finance and financial management. I have managed businesses' money and got paid to do it. The reason I know so much about financial management is because I suck at it. I do. I am the impulse shopper who makes Bipolar people look fiscally conservative during their highs. I have absolutely zero self control, and many moons ago, I was the shop-a-holic (like I couldn't leave a store without a bag in my hand, and it still feels odd to do it). The sad thing is, all the shit I buy, I don't even use it. I buy toys I don't play with, and then I wonder where my children get it from. Instead of researching the psychological BS like it's going out of style, what do I do? I research and study the hell out of financial management. Part of it is because it was my job for a very long time, in my defense. Basically, in a nutshell, I'm poor because I blow money on the White Sale because I just need to have more dirty laundry to do... I must have been dropped on my head as a baby I swear it sometimes.

So, back to financial management. This year, I'm vowing to take my tax refund and stick it all in savings. I really wanted to do things with it, like buy a new to me used minivan because mine is getting sad. I want a new sofa because the kids have gooed this one into something I won't sit on without putting a blanket on top of it. I'd like to move. I'd like to travel. I'd like to take a vacation without the kids. Fuck me I just spent the whole thing and now I'm in debt up to my eyeballs.

There's a basic law in economics. Something about wants always exceeding needs. Basically, you are always ALWAYS going to want shit. You will always be wishing, dreaming, hoping, praying for something. Unless you are a Taoist Master who is truly content with nothing (as that's part of the uncarved block philosophy), you are going to want shit. You will get that shit, and then you are going to want more shit.

Okay, so we have our future to look forward to. Wanting stuff. Meanwhile, most of us have a past that haunts us. Debt. Yes, I owe money to loan sharks, and of the worst kind, student loans. Those people are ruthless too. Tip to whom it may concern: If you owe a debt where they take it out of your tax refund, and you file married filing joint, you can keep the portion your spouse would get by filing an Injured Spouse Form, assuming your spouse doesn't have a debt taking their refund.

I have friends who firmly believe the best way to financial freedom is to pay off debts first and then save. They have it down to a science. They take their pay checks, take out whatever they need to live off of (regular bills, groceries, etc.) and then they take the rest (they actually live with less than they make, must be nice) and pay off debts starting with the ones with the highest interest rates.

I disagree with that concept just slightly. Yes smart. If you really do have a crap-ton of money coming in that will feed and roof your family and have a bunch left over, fabufuckinglous for you. But where people like me mess up, I generally consider savings, like most other people, as a luxury. It is a luxury to have money sitting aside for a rainy day. Right? WRONG. Really, savings is just as important as the rent. It should come before debts, like maybe not everything left over from a pay check, but putting something aside is important. Reason being? Because the rent is important. The electric bill. Groceries. Most of the time, your savings is going to cover a month's rent, or that surprise we just added 600 dollars to your electric bill out of the freaking blue and we are guessing it's your AC or hot water tank that did it to you this month. It will cover that flat tire, the oil changes if you are short that moment which will in turn save your engine from blowing...

Savings is definitely much more important than a new sofa or upgraded vehicle, no matter how much my shit is shit...

USAA has this awesome service to its members. They offer free financial advice. I love it. I talk to those people frequently. They are who told me the importance of saving and how spending is stealing from your future blah blah blah. Now USAA recommends, like 50 people at that place recommended this to me in the last 10 years, to have a savings of a thousand dollars for invariable expenses like property taxes, oil changes, vehicle maintenance. This is to handle expenses that don't occur every month. You constantly put back into it and maintain it. THEN they suggest an emergency savings that will cover 3 to 6 months of the income you are used to receiving in the case you can't work for a minute (like you get hurt or lose your job). Now of course, this is a paradigm, and to someone like me, it's never going to happen.

I can come up with 50 different savings accounts for things I want to save up for, like Christmas, vacation, vehicles, house, camper, a 44 magnum with an extra long barrel like Dirty Harry used... Then I'm back at square one. I just spent all my savings.

I think the main part of savings is turning your wants of things to buy into wants of things to invest. Instead of wanting a sofa, want stock. Instead of wanting a new car, want a retirement. They are all listed as assets on a balance sheet in accounting nerd world, but the difference is cash assets CAN make more money whereas non-cash assets generally depreciate (they become worth less money). Unless you are investing in a car that will be worth more money in 5 years than it is now (like a classic)...

In the past, when we were doing well before we drifted off up shit creek without paddles, I had most of my savings going into a ROTH IRA. The beautiful thing about that was the pot of gold end of rainbow awesome, it was like doubling in a year. I got a Scrooge boner looking at the statements. The other awesome things about it, I opted that as my kids' college savings until we needed it for rent and stuff. I guess if you pull out of it early for education, they don't penalize you with taxes. This way, if your kid gets a scholarship, grant, or decides not to go to college, you can still use it towards your retirement.

The other thing I did, I put a little into a money market account. It too made me some money on interest. But that is really dependent on the financial institution you go through unless you really want to get all economical Robert Deniro in the movie Casino about it. Me, I just told my bank, "Medium risk," and let them have at it. My bank did a decent job with it. They may or may not do so well next time.

But now, I think I do want to get Robert Deniro in the movie Casino about investing. Instead of looking for sales on new shoes I probably will only wear once in a year, I can look for sales of stocks I think might go up. Some of them are like a dollar a share. That's like going to the dollar store. It's about shifting perspective.

If you want to pay off debts while saving, I did this many years ago with my "Welcome to 18 here's 50 credit cards to "build" your credit by irresponsibly maxing these out so we can charge you fee after fee plus interest" debts. I found a CD (not Britney Spears, a Certificate of Deposit) that earned a higher interest than a loan. So I purchased CD, and then I borrowed against it using that money to pay off debts. Then I paid little by little on the loan, but I still earned more interest on the CD than I paid in the loan. I know what you are thinking, I'm freaking brilliant. Well, A, I didn't make a lot of money, and B, it was all God's idea. It just fell on my lap in a Fate like way. If you are thinking, "What? You lost me at Britney Spears..." Find the money financial nerd in your life, whether it's your mom or your husband, and tell them what I said here like it was your idea.

The other thing is, sort of non-related but related, indirectly related, my kids are spoiled. I've seen spoiled rich kids in their 30's. I don't like them. I don't want my kids turning into that. I need to remove a lot of the "luxuries" from this home. Not this house. This HOME. It is cluttering the HOME part of my family.

So, back to my original point, I'm taking my tax refund and saving it like a good grown up. I'm putting on my big girl britches and doing something smart. Discipline is really what it boils down to. Something I totally lack, like go down to my father's grave and ask him, and he will probably scream in a ghostly voice, "That girl lacks discipline and focus." But like my momma told me, "You are the most stubborn person I know. That can be a good thing if you are wiser about what you are stubborn about." So I'm vowing to be stubborn here about savings. I may end up buying a sofa though and then save the rest. It's a cheap sofa from Big Lots, so it's not like I'm totally blowing money. Right?