Act your Income!

When your income increases, it is tempting to increase your spending.  Living within your income is hard to do.   Living below your income range, even harder.  But if you want to accumulate wealth, rather than squander it, you have to avoid lifestyle creep.

We've been debt-free for about a year now.   It ain't easy.   Why is this?  Well, the temptation to spend is always there, and only now, when we are forced to (or are forcing ourselves to) pay cash for everything, is this readily apparent.

And like everything else, it is the little things that add up.  We used to laugh at our older friends for buying cheap booze or wine.  We figured, "Hey, it's only a buck or two more for the 'good stuff' - why be cheap?"

And so on, down the line.  We were young and "had money" - why not spend it?  And I rarely looked at the prices of things - of anything - unless I couldn't qualify for the loan to borrow it.

And so, credit card debt gets rung up, a little bit at a time.  A trip to Lowe's here - some plants and stuff for the house, $100.  What's the harm?  But little purchases like that add up - over time - and you end up in debt.

When forced to pay cash for everything, you realize how poor you really are - and how expensive things are, and how you've let your lifestyle get expensive.   Over the last two years, I have been cutting expenses to the bone, and I realize how my lifestyle inflated since age 20, when I was making maybe $15,000 a year, to age 45 when I was making ten times that amount.

With each increase in pay, came an increase in spending - and this is a very dangerous thing. Big checks seem like a lot of money.  But you have to realize that you have to pay your bills - including the IRS - first, and pay yourself by building up an Estate.

If you are married, this problem is compounded by two, particularly if both of you are spendthrifts.   Trying to control spending becomes a "race to the bottom" and if you try to rein in your spouse's spending, well, it will get ugly in a real hurry. Suddenly, every purchase you've ever made will be called into question, just because you asked whether they really needed that 99th pair of shoes.

But on the other hand, if this is something you can work on together, it can strengthen a relationship significantly.  Working out a budget, planning on goals for saving - and for spending - can be a lot of fun.   Each purchase is not just something bought casually and forgotten almost immediately. You sit down together and decide what it is you really want to do with your money, instead of just spending it wantonly.

For example, we had planned on installing some plants in our front yard to act as a screen from the road.  Some palm trees and decorative grasses which would require little water, seemed like a good idea.   But the more we thought about it, the less sense it made.  Why plant plants for other people to look at?   The front lawn is fine - let it be.   If you are going to plant something, put it in the back where YOU can enjoy it, right?

You can bankrupt yourself doing "home improvement" projects like that - and add little or nothing to the value of your home.  Just walking away from it turned out to be the best idea.  And thinking about this and discussing it, for weeks, even months, turned out to be the key.   In the past, we would have impulse-bought it all, over a weekend, using a credit card.   Bad idea.

Or take those 99 pairs of shoes.  In the past, when we bought shoes, we would just go to the store and buy whatever was on sale, without thinking.  If something looked attractively priced, we'd buy it.  As a result, we have probably 20 pairs of shoes apiece, most of which are never worn, or worn just often enough to justify not throwing them out or sending them to Goodwill.

And that is the problem with the "hey, let's just buy shit" lifestyle - when you are older, you will be stuck with a lot of merchandise that was bought indifferently at an earlier age.  For all I know, my Dad is still wearing that Yellow Parka.

We finally broke down and bought new sneakers the other day. Good, comfortable shoes are important, if you don't want back problems when you get older.   And the pairs we had were great, but wearing out - after nearly seven years.   We tried on other shoes at the Sporting goods store, but again, it was a matter of buying "what they had on sale" - not what we wanted.   We resisted the impulse to impulse-purchase junk that we didn't want (if you buy crap, even "on sale" there is no savings - particularly if they are uncomfortable shoes that end up languishing in your closet).

So after literally months of deliberation, I bought the same pairs online, aggressively shopping on price.  The me of five years ago would never dream of spending so much effort on such a trivial purchase.   But good shoes last years, so there is no point in buying "on sale" junk and hoping you get lucky.

And so on down the road.   We would like to take a river cruise on the Rhine some time.   If you book these well in advance (a year or so) the prices are steeply discounted.   At first, I thought about taking a "deluxe" trip of two weeks, with a balcony cabin, etc.   But then the costs started escalating over $10,000, and suddenly, it seemed far out of reach.

In the past, I would have called up and put that on a credit card.  Being forced to pay cash, we had to re-think it.   So we will book early, pay a down payment, and then pay the rest over time.  And we will get the standard cabin, thank you.   And a week is more than enough for us.   The cost will be far less and it will be paid for, not put on a card and paid for, over time, with tons of interest.

Yes, this is hard.  And you realize you are not as wealthy as you thought you were.  And oddly enough, you realize that other people are spending like they are wealthier than they think they are, which gets uncomfortable.   A friend recently revealed that he has very little money saved in his 401(k) - about $4000 or so.  He lamented that it was not "making money for him" and of course it never will.   You have to save money to make money, and $4000 isn't going to magically transform into a million bucks, overnight.  (Although, if you put that away at age 20, it would be worth $84,009.81 at retirement, at a 7% annual rate of return).

The funny thing was, he goes out to lunch every day and pays about $10 to eat, which he puts on a credit card.  We make sandwiches and bag our lunches.  We are "wealthier" than he is, in terms of assets and income, yet we act poorer.  Actually, we just act our income - rather than how we wealthy we believe we should be, or think we are.

Acting your income is very hard to do, particularly when there are so many "cheap" consumer goods to buy these days, and plastic credit cards are to tempting to use.  But if you don't, over time, you will accumulate debt, and wake up one day and wonder "how did I get here?"

Would it Really Change Things?

People are all up in arms about income disparity.   Assuming we solved this "problem" tomorrow, would it really affect your personal finances?  No, it would not.

A young college graduate carries a sign while "Occupying" Wall Street.  The sign reads, "I have $25,000 in student loans, and I will never be able to pay it off!"

Taking aside what a laughably small amount of money that is (about the price of a new car) and how long they have to pay it back (the rest of their lives), how does income disparity affect this person's life in real terms?

Suppose we let the Bush Era Tax Cuts (which affect the rates of top earners only) expire in 2013?  Or we enacted a "Buffet Tax"?  Or cut the exemption for the Gifts and Estates Tax from $5 Million to, say, $2 Million.   How would this affect your bottom line?

Well, first, as an aside, while these steps would cut taxes on large income earners, they might not put a real dent in the really wealthy, who can afford to shield assets through a variety of schemes - all of which are legitimate.   But it would ding the guy making, say, $500,000 a year.   The fellow making $5,000,000 a year - he has less to worry about.  But it would be a boon to accountants and lawyers everywhere.

But let's just say we did this - tomorrow - and that in fact it even worked and income disparity levels magically dropped to, say, 1960's levels.

• How would this affect the balance in your 401(k) plan?   If  you have under-funded your plan, it would not change that fact, at all.

• How would this affect our student loan fellow?   It would not pay off the balance of his loans. 

• How would this affect your credit card debt?   You would still owe the money. 

• How would this affect the debt/equity ratio on your home?   If you are "underwater" on your home, you still will be.

• How will this help you find a job, particularly if you have no job skills that are in demand?

How, in short, will this affect you at all?  While it might cut the Federal Deficit somewhat (don't bet on it, Congress might just spend more as a result) and it might make you feel all warm and fuzzy that the 1%'ers are only making 180 times as much as you are, instead of 260, in reality it really won't affect your life much.

And yet, people argue that this is the pressing issue of the day.   I'm not saying it isn't important, only that watching what is on your own plate is far more important to your personal financial well-being than getting involved in greater political causes.

You see, your own personal actions - and inaction, and mis-steps - are more to blame for your personal situation than anything else.   If you exhibited poor financial judgement and got over your head in debt, be it credit cards, student loans, mortgage debt - or a combination of all three - taxing the rich isn't really going to change that much.  In fact, not at all.

And similarly, if you made poor choices in your major in school, and now cannot find a job, protesting the income of the very wealthy isn't going to change your job prospects much.

But, hey, it feels better to externalize your problems than to look inwardly.   The clueless guy with the sign protesting his student loans doesn't want to think that, Gee, maybe he might have made better life choices than studying "how to party" at Bong-Hit University.

And please, don't tell me that doesn't happen.  I spend 14 years in college.  I was in a fraternity, too.  I delivered pizzas to every dorm, frat house, and apartment flop-house.  I know first-hand how much college kids goof off and how much money they squander on crap, while ostensibly studying for a degree.

The Bush Era tax cuts will likely expire in 2013, if President Obama is re-elected.   Of course, the Republicans will try to throw a wrench in the works to stop that from happening.   But if you want to enact "social change" you might want to think about voting and maybe getting a job, so you can contribute money to a political campaign.   Because being a dirty, stinking hippie and then rioting and smashing things only serves to let the other side say, "See, I told you so, this is what happens if you let these folks run loose!"

And yes, that is the platform Nixon used to get elected in 1968, thank you very much Jerry Rubin.

Political activism is a fine and wonderful thing.   But don't let it serve as a substitute for taking care of your own business.   I have met far too many of these "political types" on both the Left and Right, who will bore you for hours about how they will "set things right!" if only they were in charge.   But ironically, they cannot even manage their own personal lives, which are a train-wreck of substance abuse, shattered personal finances, and underemployment.

And if asked about this, they say, "Well, there are greater issues at stake, here!"

But the reality is, these "issues" are just a sideshow distraction.

Free Gas for Two Years?

People will salivate like Pavlov's Dogs for Free Gas!

On the way to the grocery store today, I pass a sign for the local Ford/Kia dealer.  This dealer advertises cars for ridiculously low monthly payments, which of course is a good reason not to trust them.  There is always a catch when they say you can get a new SUV for $160 a month - and the catch is that it is a lease, there is a huge down payment, and there are back-end charges.

But now, they are onto a "free gas" gambit.  The plebes are all up in arms about the price of gas, so if you say you are giving it away for free, they bite on whatever odious deal you want to sell them.

The sign just says, "Free Gas for Two Years!" and the name of the dealership.   No details on what this means or why.

What was funny about the sign - laugh out loud funny - was the side banner that said "No Gimmicks!"

OK, here's the deal, no one is "giving away" free gas.  It is a gimmick.  And putting a little note on it saying "No Gimmicks!" doesn't change that basic fact.

What are they "giving away"?  Well, money actually - in the form of a debit card - and you pay for it with the price of the car.   Say you buy a Ford Focus, that gets 30 mpg.   The average person drives 15,000 miles a year, which works out to about 500 gallons of gas, which at $3.75 a gallon, works out to $1875 a year.   Two years, well that would be $3750.  But of course, they might not give you that much.

That's a lot of money on a very inexpensive car.  So how do they finagle it?  Well, for starters, they play with the numbers - not using the 15,000 mile a year mark, for starters.  Chrysler did this back in 2005 to move some iron, and their debit card was $2500, not $3750.  And the rebates offered were higher than the gas card.  So if you took "free gas" you didn't  get the rebate.   So free isn't free, you pay for it.

So why isn't this a good deal?  After all, they are giving you at least a grand or two off on the price of the car, right?  Yes and No.  Again, to get the "free gas" you forgo any other incentives AND you pay full sticker.   It reduces your options, in terms of negotiation.

Free cash would beat free gas, any day.

And if you are financing the car, what you are doing is financing the "free gas" - which means a higher loan balance and more interest paid.  Good news for the finance company, and no doubt the dealer gets a "taste" of this as well.

But to a poor person - a person impoverished in their spirit and mind - this seems like a "good deal" as they are dangling out the words "free" and "gas" and they figure they can plan their auto expenses, at least for two years, based on the monthly payment.

But since they are paying more for the car than they have to, and buying a brand new car (and financing it) they are actually getting a very raw deal - and paying far more, in terms of overall ownership costs, as well as cost-per-mile, than I pay to drive my BMW.   It makes no sense.

So where was this billboard?   That is the tipoff right there.  Just down the road from Wal-Mart, near a corner famous for its Title Loan shops, Pawn Shops, and Check-Cashing stores.  Oh, and the Dog who Rents Furniture.  I forgot about him.   In other words, it is odious deal corner, right down the street from the projects (which they call the "homes" to make them sound more homey).

In other words, they put this billboard where all the poor folks can see it - and bite on the hook and swallow the lure.  And gasoline is a powerful lure.

The more complicated you can make any financial transaction, the easier it is to rip-off the consumer.  Buying a car should be a simple transaction - car on one side, money on the other.   Adding gasoline, toasters - or in one celebrated case, automatic weapons - only serves to distract the buyer from the underlying deal.

New car dealers are just a bad deal, period.  And new car dealers in small towns (which this one was) are the worst of the lot.   They will do or say anything to get their country cousins to sign those loan docs on whatever load they have on the lot.

Just walk away from that nonsense!

Small Town or Big City? Big City.

Small towns may have a lot of charm, but they have very limited economic opportunities, particularly for young people.

Many folks claim that there is nothin' better than country livin'.  And apparently the letter "g" is missing from their keyboards.  But living in the country ain't all it's cracked up to be.  More people live in poverty in rural areas than in urban ones, and there are many good reasons for this.

Before you decide to "ditch the rat race" and head out to the sticks, think about it carefully.   There are a lot of advantages to city life:

1.  Job Opportunities are Better:   It doesn't matter if you are an unskilled worker or a highly trained surgeon, your opportunities in the big city are just greater.   If you are a cook, in a small town, the only place to work is Edwina's Korner Kafe.  In the city, there are hundreds, if not thousands of such jobs.   This means not only are you more likely to get hired, but that if you don't like your job, you can go work somewhere else.

2.  Commutes are Shorter:  Even though the traffic in DC is bad, I was never more than 5-10 miles from where I wanted to go.   At my country house, everything was 20 miles away - or more.  Often far more.

3.  Better Bargains:  If you want to buy a car, there are hundreds of dealers near a big city - you can cross-shop.   But in the Country, there is one car dealer, and he has three cars in stock, all brown.  If you want to buy a used car, there are plenty of people selling their old rides in the big city - for low prices.  In the country, old Clem has his clapped out car for sale for months, if not years, before he will "get his price".

4.  Better Selection:  You want ethnic foods or esoteric parts or unusual kitchen gadgets?  Whatever it is you want, the selection in the big city is better and cheaper than in the country - and you don't have to drive an hour to get it.   Of course, shopping online levels this playing field, somewhat, today.  But you can't mail-order a meal in a Thai restaurant to the middle of nowhere.

5.  Medical Care:  In the big city you can go to a state-of-the-art oncology clinic.  In the country, they have the Bumfooque County Veterinary Clinic and Oncology Center.  Which would you rather go to?  When my Sister was dying of cancer, we went to visit the five-bed hospital that cared for her.   The boasted of having seven hearing specialists on staff - and one oncologist.  She died.

6.  Housing Holds Value More, Easier to Sell:  In major cities (and places like Detroit and Syracuse don't count as major cities, thank you) the value of Real Estate hardly budged during the downturn.   Property values in the greater DC area, Los Angeles, New York, etc. may have dipped slightly, but nothing like the drops in speculative places like Las Vegas or Miami.  And in the country, it can take years, literally, to sell a house, as the number of potential buyers is very, very small.

7.  Cultural Opportunities Are Greater:  In the Country, you might have a local dinner theater or amateur theatrical troupe, or a Broadway show might come to the local theater, with the traveling company.  But it ain't like the big city, where you get shows, concerts, and all sorts of cultural activities.  Libraries are bigger and better stocked.  There are also small theater groups, small bookstores, cafes, and night life that you just don't see in a small town.

8.  Everybody Doesn't Know Your Business:  In the country, my neighbor came by the other day and said, "I see you had company yesterday".  I was a bit taken aback.   "What do you mean?" I said.  "Well," she replied, "I saw a white, 2002 Ford Taurus parked in your driveway from 9:45 AM until 1:15 PM, with a Caucasian couple in their mid-40s getting out, he as was about 6' 1" brown hair...."  You get the idea - you actually have LESS privacy out in the sticks, as there are so few people.   In the big city, you can be more anonymous.


9.  Better Schools, educational opportunities:  While many "inner city" schools are troubled, the suburbs usually have excellent, well-funded schools.  In the boondocks, the small students and small number of classes mean that your kids won't be able to take a lot of more esoteric courses like AP calculus or AP English.  And the teen pregnancy rates in rural schools rival those of inner-city schools.  For adults, educational opportunities are greater as well.   There are six night law schools in the DC area - George Washington, George Mason, Georgetown, UMD-College Park, American, and Catholic University.  I could go to night school in DC much more easily than in a small town or rural area.

10. It's Quieter and Cleaner in the City:  No, really.  We found the country to be noisy, dirty, and dusty.   Since there is less background noise, you tend to notice noises more - chainsaws, hunting rifles, dirt bikes, agricultural equipment, etc.  And there is a lot of these noisy machines, too!   My neighbor decided to buy a "dirt track" race car and test it out in his corn field - a half-mile away.  With no exhaust system other than straight headers, the sound was deafening.  And the dust he raised covered the neighborhood for hours.  Local farmers spread liquid manure on the crops - only after letting it get funky in these nasty ponds.  And this is when they are not spraying herbicides, pesticides, and chemical fertilizers on the fields - all of which soak into groundwater, which means your well.   You drink this shit.   And keeping your car clean?  On dirt and gravel country roads?  I could go for weeks without washing my car in the DC area, and since it was garaged, it looked like new.  In the country, the car was soiled the moment I finished washing it.  Clean quiet, country livin' - is just isn't!

Now, this is not to say that country living is never a good thing.  The air can be better (compared to a code red day in L.A.), the views can be great (or not, there IS a lot of farm smells, chemicals, and outright squalor).  But for the most part, living out in the country can be a big disadvantage to you, personally.

But what about the cost of big-city life?  Yes, it can be more expensive to live in a city than in the sticks.   Here in Brunswick, Georgia, you can rent a house for about $700 a month.  In the sticks, even less.   In the DC area, even a modest apartment might set you back more than $1200 a month or more - in a decent neighborhood that is close to things.  But if you don't have to waste 2 hours a day driving all over the place, it might actually be a cost-saver.

And, of course, wages and salaries in the big city are higher - and opportunities are greater.   When I moved from Syracuse in 1987 to Washington, DC, I was shocked that the sales price on my house in Syracuse would barely make a down payment on a place in DC.   It was depressing, at first.   But I worked hard and made more money and, well, did well for myself.

If I had stayed in Syracuse, none of that would have happened.  I would have been laid off from my manufacturing job and struggled to find work - probably looking for months and months for the few jobs that were available, and having to "settle" for what I could get, rather than pick from among multiple offers (as I did in DC).  And starting my own business in the hinterlands would have been much, much harder.

And small, depressed cities like Syracuse (or worse, Utica) are arguably even worse than living in the boondocks - there is little cultural exposure, few jobs, not much in the way of bargains, and a high crime rate to boot.   And unlike the boondocks, no deer hunting.

So why to people live in places like Syracuse?   Or the middle of nowhere?  A lot of folks feel attached to a certain area - it is comfort food to live within a mile or two of your parents, your high school, and all the places you grew up with.  And many folks do this and drive 100 miles to a big city to work, too - thus having the worst of both worlds and a nightmare commute to boot.

I suppose also that it is possible to be a bigger fish in a smaller pond, as well.   But for many, this often means being beholden to one employer, client, or the like.   The small-town lawyer who works mainly for the local manufacturer will surely have a one-client practice.   And if the town has one employer, chances are, you work for them, directly or indirectly, and can't afford to piss them off.

If you are young, and starting out, look for job offers in the big city.  When I graduated from college, I had offers from air conditioning and appliance companies with factories out in very rural areas (a new trend in manufacturing in the last 30 years).  While they were not bad jobs, the pay was not great and the areas were very economically and socially depressed.  And if the job didn't work out, well, there was no competing employer in town to go to work for.   You'd have to sell your home at a loss and leave.   And if the factory closes, well, good luck!

And of course, many companies like to locate factories in small towns for this very reason - land is cheap, and people are desperate for work.  And since you are the only game in town, you don't have to worry as much about people quitting.  Good for them, perhaps not as good for you.

We were driving through rural Georgia the other day and saw lots of clapped-out economy cars, with window paint on the back reading "Woo-Hoo!  Class of 2011!".    And I thought about how many of these kids would never leave their impoverished Counties, get some girl (or get) pregnant (if they hadn't already) and settle down to a lifetime of low expectations and limited opportunities.  And this sort of thing is endemic to most rural areas.

We enjoyed our time in Central New York, but opportunities there were limited.  I did not get any business up there at all, of course (there is none) but I did bring a lot of disposable income into the impoverished County I lived in.  Of course, the locals in small towns don't appreciate "outsiders" - even if they are bringing in cash from out of State and hiring people.  When it came time to sell our home, the average time-on-market of 1.5 years scared us to death.  We sold out quickly, by pricing the home attractively, and lost a lot of money.

In Georgia, we are somewhat in the same situation, although we have far better health care here - a major hospital only 10 minutes away and the Mayo Clinic only an hour away, in Florida, of course.  But it still is small-town living, with limited cultural opportunities and no real bargains to be had.   We have to drive to Florida or Hilton head to look at a car or to get a good dish of Indian food.

And job opportunities are scarce, to say the least.  Some manufacturing jobs, some service sector jobs, and that's about it.   For lawyers, it is the usual mix of Personal Injury cases and DUI arrests.  Not a real great place to hang out your shingle.  And yea, the locals don't appreciate outsiders, although again, I am bringing in money from out-of-State and hiring locals.

Down the road, we will probably sell this place and move back to a more major metropolitan area - an area with more job opportunities and more cultural diversions - a place where one can walk to a cafe or grocery store, or drive a short distance to get whatever it is you need.

Country living is fun and all, but it is no place to be young - or old!  And it certainly is no cost-saving alternative.   In reality, it kind of sucks.

(Originally Posted, July 26, 2011.  Edited April 18, 2012)

Tax Refund?

Getting a refund from the IRS is not a "gift" from Uncle Sam - unless you have more tax credits than income.  In most cases, you are merely getting your money back, after loaning it to the government for a year - interest-free.

At this time of year, many people get tax refund checks from the government.   Mine came today, by direct deposit - a whopping $200.    But many folks get $1000, $1500, or even more, and are convinced this is a "good thing" - after all, the government is sending them money!

But of course, they are just sending you back your own money after borrowing it for a year, interest-free.   If you are getting a huge refund, then chances are, you are not planning your taxes very well.  And in most cases, it is very poor people, or middle-class people who make poor financial decisions who relish these big refunds.

For example, one person tells me, "I love getting my refund!  It is like a savings account that pays off every year!"   And yes, it is a savings account, that earns zero interest.

But, of course, given the fractional rates of return these days on savings accounts, maybe this is not such a bad thing.   Unless of course, you also have debt.

Another person tells me that they "Pay off their credit card" (or pay it down) with their tax refund money.   This is probably better than some other approaches (see below) but it also is poor planning.  Why?  Because if you are carrying credit card debt at 15% interest all year long, and then paying Uncle Sam more than he needs, and getting 0% interest on that money, you are in effect, running up an unnecessary credit card debt, to the tune of your tax refund.

That money, applied during the year to your credit card, could save you a lot of money in interest payments.   And if that amount of money is what you are running up on the card, maybe you could afford to pay cash and not charge things.

Using the IRS and tax refunds as a Hillbilly Savings Account is not a good idea - it is just poor financial planning, period.

But I said it gets worse - and it does.   For many people, spring is the time to go out and spend money - on motorized vehicles, of course.   And car dealers and jet ski purveyors rely on the tax refund as a "down payment" for a car, jet ski, boat, or motorcycle.   And a lot of poor financial planners do just that.   Every year, the "tax refund" is used as a down payment for yet another debt obligation, to clutter up the yard with an other internal combustion engine.

Thus sudden pool of money is not viewed as an opportunity to improve their financial picture, but rather as a means of going further into debt.

So how do you get around this?   You can adjust how much is taken out of your paycheck by altering the number of exemptions.   It is not an exact science, to be sure, but the withholding amount taken out is supposed to track how many "exemptions" you have - you, the spouse, the children.

However, you can alter this amount if you want, claiming zero exemptions (if you think you may have a higher tax burden from other income sources and would rather not pay "estimated taxes") or go to higher numbers.  You don't have to have four kids to claim six exemptions.

But again, this is not an exact science, and you have to be careful.   If you claim six exemptions, then the amount of tax taken out might not be enough to satisfy your tax bill, come April 15th.   At that point, you have to cough up the money, and if you don't, there are penalties that may be applied.  Also, underpaying taxes through the year can result in penalties in some States.

Withholding is the most powerful weapon the IRS has, and they don't want people messing with it.

However, if you are getting a $1500 refund every year, and have a $3000 tax bill, you may want to change the number of exemptions you are using - going up by one, for example.  You can do this by filing a new W-4 form with your employer.

Ideally, when tax time comes around, you should end up getting back a small refund or owing a small amount - a few hundred dollars either way.   That means you have correctly estimated your taxes for that year, rather than wildly over-paying or under-paying them.

The other day, on NPR, they interviewed some brain-dead mouth-breather who said, "I put off filing my taxes this year.  Last year we owed a lot of money and I just didn't want to deal with it this year."

That is an intelligent approach to taxes, to be sure.  Yea, she was from Georgia.  Go Figure.

Doing your taxes at the last minute is dangerous and let me tell you why.   When my accountant was dying from a brain tumor, she extended my tax due date.   Unfortunately, this meant that she was unable to calculate my taxes ahead of time.   I found out, too late, that I owed $20,000 in Capital Gains taxes, and had two days to come up with the money.  OUCH.

I was able to handle it OK,but it illustrates why the tax business is one area where procrastination is NOT a good thing.   And thanks to Turbotax, you can go online in January and sort of do a rough guess on your taxes early on - and have three months to plan on how to pay them.  And as April 15th gets closer, you can refine your return and figure out the actual amount.

But living in denial?  Not sure that is a good plan.

Figure out what you owe in taxes and pay that amount.   Paying too little or too much during the year is not a good idea.   You CAN adjust your exemptions on your W-4 form to tailor your withholding to your actual tax bill.   But don't go crazy - and start calculating your tax bill early on, so you won't have a nasty surprise in April.

If you are getting a huge refund check every year, don't congratulate yourself.  Because you are making a poor financial decision.