Tax Day!

If you live in the United States and you haven't submitted your taxes yet, STOP READING and go get it done!

As most people who read this know, I am not a fan of tax returns.  It makes me feel like the government has been holding my money hostage all year.

Recently I read a blog post over on I Will Teach You To Be Rich (A blog which, frankly, I read just to find reasons to be annoyed, it seems), regarding tax refunds.   In that article he basically said that all of us who say getting a tax refund is bad are morons.

However, there are 3 problems with your advice:
1. Your advice is totally unrealistic as Americans spend whatever they have
2. Americans don’t understand withholding, despite your repeated exhortations to “change your withholding!” Perhaps you don’t realize that those words sound like COMPLETE GIBBERISH
3. Most people would rather get money back than pay it — numbers be damned

Needless to say, I think he's selling the average American short.  Sure, the mental aspect of money is true, and most of us WOULD rather get a big refund, rather than RISK owing money.  I get that. 

If that wasn't 100% true, then I would choose to pay NO federal tax via withholding and would pay in quarterly just enough to tide the government over, and then pay my balance every April.   I don't want to be writing checks to the government all the time, though, even if I WOULD get the most interest that way.  So I aim to break even.

However, the fact that we naturally want to avoid paying money doesn't mean that people "don't understand withholding."  I DO think it means people are afraid of not having the money set aside to cover the bill.

And I think that's changing in America, daily.

They say that today's graduating seniors will be the most frugal generation since the Great Depression.  We are introducing to the world a generation of people who know what it means to overspend, be in debt, have homes and cars repossessed, have no job and trouble making ends meet every day.  A generation that understands "emergency funds," and "planning to spend."

More importantly, that lesson is being hammered into people like myself.  I no longer have fear of "what if I owe on my taxes?"  I know that IF I owe on my taxes, I WILL have the money in savings because I PUT the money into savings.  Every month I pay myself.  Others who have gone through bankruptcy or who have crawled their way out of debt biting and scratching have no fear of OWING money.  The power to pay it is in their hands, after all.

By the same token, I think the belief that Americans will spend all their money is short-sighted and pessimistic.  Again, I believe that those of us who would rather spend $0.70 and pocket $0.30 are gaining a voice, forming a crowd, and will be rewriting the book on "normal" spending habits.

So with that change I predict a growing change in the coming years, with the average refund decreasing. 

The tax system as we know was established, after all, to "force" Americans to save.  It didn't really work, as not too long ago, savings in America were at an all time low.  For many, tax returns weren't treated like savings. They were being used to PAY CREDIT CARDS and LOANS and CONSUMER DEBT.   So.  The government holds your money, interest free, while you incur debt at...well, in my case, 30% interest.   Not really a great savings plan.

Those who don't have debt often do treat it like a windfall, and they run out and spend it (hello? You can now have your tax return put on a debit card?!?!   Some savings plan!!).   They make a major purchase.  Not necessarily getting a good deal because they haven't been shopping around or planning or waiting for the right moment.  They get a "surprise" check in the mail and they run out for a new television, a new mattress, a new car. You name it.  With the joy of a lottery winner.

Eventually, though, the wiser, frugal movement will spread.  And even the most carefree American will understand that, if you can tuck that money away, even at 1% interest, and HAVE it available for when the television goes on sale (perhaps on Black Friday, when tax returns are long since spent?), then it's a win-win.

Would I enjoy finding out that I miscalculated and the government owes me $2000?  Of course. 

Do I REALLY enjoy knowing that I have $2000 more in my savings TODAY then I did a year ago, and it's been earning interest all along? 

You betcha!

Always be Alert

Just a quick post tonight, because how could I not share when I get taken for a ride financially?  At least it was a mini ride.

So I went grocery shopping today, and, as I always do on Sundays, I headed straight for the bargain bin in the bakery section. . . this is a cart they hide behind the doughnuts with the marked down bakery items.

My score for the day was a package of 2 ciabatta rolls, marked down to 2/$1.   The package rang up as $0.50, which I wasn't sure was right, but I wasn't going to argue.

So, $0.25 per roll.  Not a bad deal.

Until I got home and noticed that the standard tag on the package was 6 rolls for $1.18.

So I actually paid MORE for buying about-to-be-thrown-away rolls.

Not really a shining moment in my grocery shopping, money-saving highlight reel.

I Got Out of Debt

As I drove home tonight, I was seeking inspiration for something to blog about today.   When I turned on the computer, I hit a few popular blogs to see if there was a topic I could put my own spin on.

I realized that some of the most popular bloggers out there are IN debt.  They are TRYING to get out of debt.  They are great at telling you how to scale down, how to save money, how to spend less, need less, get by with less.

I have to tell you, I can do that.  I know how to do that.  I DID that.  I can tell you 50 great ways to serve Ramen noodles and I can tell you all the things you don't need to buy.  I can share with you why vinegar and baking soda are the only cleaning supplies you need and how to mooch free vegetables from your friends with gardens.

I did all that, and I got out of debt.

I don't want to be that person anymore.

I read these articles about the "extreme couponers"  (I can't watch the show, since I don't have cable...perhaps I should hulu it?)  And I don't want that to be my life.   I LOVE saving money. I think it's worth it to take the time to look at the ads.  I think coupons are helpful in sticking to a budget, and I LOVE it when my grocery receipt tells me that I saved 50% of my bill.  But I don't want to spend my time searching for ads, I don't want to be forced to buy only what I have coupons for, and I don't want to travel to every store in the metro to get the best deal on every item.

Today for lunch I had a tuna fish sandwich.  I bought the tuna on sale, and had it on the uber-cheap bakery rolls that I bought on a Sunday from the bargain we-have-to-sell-these-today-or-throw-them-away bin.  And I topped that sandwich with thick slices of pickles.  The expensive, always refrigerated pickles.

I didn't follow the rules I learned digging out of extreme debt. I didn't run out for $10 lunch (probably a tuna sandwich someone else makes), either. 

So what I thought about today wasn't really a blog topic, it was a reminder of why I want to write a blog.  To share where I am now, to talk to others like me (who all seem to be a little bit envious or emulative of previous generations), who aren't in Extreme Debt.  People who don't need to know 75 uses for their pantyhose after they get a run.

This is the sustainable budget blog, I think.

And I like that.

Grandma's Diaries

When I went back home last autumn, I was honored when my grandmother gave me her mother's diaries.

My great-grandmother kept a meticulous diary, from 1926 well into the 1990's.   Needless to say, these are amazing.  Not just for me to be looking at a piece of my family history, but just in general.

She didn't keep a journal or a "blog," or a long rambling account on her feelings of anything.  Each day's entry is only a few lines. The weather, any visitors or travel, purchases, births, deaths & weddings.  In fact, the most sentimental entry I found was "Albert and I reminisced about the past this afternoon."   No more detail than that.

In the back of every diary, she tracked her spending and income.  Pages for each category, and meticulous records of everything she bought, for a YEAR, fitting onto six of seven pages.  Each child had a page, the car, the house, holidays.  Looking through it, it strengthened my thought that somewhere we all just got too much stuff, and our stuff needed stuff.  And then we needed stuff to store the stuff.  And then we needed new stuff because we forgot we had the old stuff stored away.   Phew!  As frugal as I tend to be, I certainly couldn't write down every item I bought on seven pages.  Even if I only wrote down how much I spent on a given day any time I spent money, I would still probably not fit it all.

But I digress.

Tucked in the bag with the diaries was a small stack of pay stubs from 1944.

My great grandmother, at that time, was bringing home about $20 a week.  I wish I could ask her how her pay was figured, since it is different every week.  Not sure if she was paid by performance/output, or if it was hourly.   At any rate, on her pay stubs, her withholdings are detailed.

I find this amazing, really.

On Aug 18, 1944, she was paid $27 for the previous week.
From that, $5.4 were taken out for federal taxes.

That's 20% to federal tax.
An additional $0.27 went to FOAB (Social Security, effectively).  Or, 1%.

There are fields for additional withholding for retirement plans & insurance, although she was not enrolled.
Her take home was $21.33 that week.

When she spent $15 to license her car, then, she was spending about 70% of one week's income.  By comparison, I would have to spend about $330.

They bought new dining room furniture that year, as well, for $25.  Over one week salary for her.  Not so different then what we might spend today.  About $500 for me.

And those $10 a month car payments are not so far off from the $300 per month payments I once made.

I hear people say that times were simpler, or things were less expensive then, or my personal favorite "people needed less" than.   
Perhaps they desired less stuff.  Or rather, had access to less stuff.  But the same percentage of money was going to the same places it is now.  Perhaps times aren't so different after all.

I don't know if there is a lesson in this, or if it's just interesting to look through.

I wonder where we would be if we all gave up computers and Ipod and "smart" phones and cable television and coffee-house coffee . If we all bought one new outfit a year.

Then again, I wonder what we would do all day.

Running Behind and Playing Catchup

Spring is here, the days are longer, and yet it feels like I have less time.  Not sure how all that works out, but there you go.

It's been a hectic few weeks.  We took a spur-of-the-moment vacation to Minnesota, where I spent money uninhibitedly.  Tax-free clothes shopping, new furniture from Ikea.  I've come home with a good chunk less in my savings account, but a new wardrobe, a new dining room table, and, of course, more relaxed after a few days away.

There's no particular reason that the blogs stopped for a while.  It's not a lack of things to talk about (if you know me you know I always have Something to talk about), although I have several posts I would like to write that aren't fully formed yet. I'm ruminating on them. .  and somehow one day turned into another and another.  

Hopefully this week with have me back on the wagon and posting away. :)

I've purchased a lot of "pickles" in the past few weeks.  Clothes, for one.  Books, for another.  Even my grocery bill was much higher than normal as I transitioned from "winter" foods in the pantry to "summer" foods.

Surprisingly, though, and perhaps for the first time in six or seven years, I don't feel guilty about my purchases.  I know I have the cash to pay for them (Ok, they went on the credit card, first, for the 2% cash back, and then I pay the credit card next week.).... but I have bought items, in cash, before and still felt guilty.

I can't say I needed them.  I don't really "need" any more books.  At 32 years old I still have clothing from high school, so you might argue I needed new clothes, but I certainly wouldn't be naked without the purchases.

I just feel like, I had a right to these purchases.  As simple as that. 

It hasn't been that simple in a long time. . . . it's a feeling I hope will continue.

(Not that I will be buying anything else in the near future!)