I know that some folks like to use a tax refund as a sort of savings plan. It pays off debt and may added to the savings account after the fact. This actually does one a disservice. It promotes poor financial planning habits and prevents you from maximizing your income. While I suppose it’s better than having no savings plan, it doesn’t encourage a mind set that leads to truly yielding wealth.

• If you use your tax refund to pay off debt, it means that you have been paying high interest for a good portion of the year. Meanwhile, the money that was already yours was earning nothing for you in government coffers. You’re better off paying your credit card balances every month and avoiding a build-up of debt.
• If you want an automatic savings plan, have your money directly withdrawn from your checking account every month. Make sure you set up your personal finance software so that you don’t think that you have that savings plan money to spend.

You can adjust your withholdings to more accurately reflect what you owe in taxes. If you work for someone else, this is usually a matter of visiting the HR department and filling out a new W-4 form. If you pay estimated taxes quarterly, you get a new estimate every year.

I ended up with a tax refund this year

This year, unfortunately, I actually got a tax refund. We bought a home in late 2007, so 2008 was the first year that we had a whole year’s worth of mortgage interest for a deduction. However, the hope is that with my latest estimated quarterly taxes I will be back to paying a little extra in taxes.

The last few years, I’ve owed money. As my home writing business has grown, my estimated tax calculations have not been adequate. However, I have normally accounted for that and made sure that I set aside a little extra to cover the difference. It’s not much of a difference, but I just accept that I’ll be off by somewhere between $200 and $800 each year. And that’s not a bad thing; it means my business income is growing. :)

What about you? Do you like a tax return of $0?

image source: arborlaw.biz

Post from: EveryJoe

My Preferred Tax Return Amount: $0

If you are interested in guest posting (I’ll be looking for 1-3 per month), contact me at mirandamarquit@gmail.com or leave a comment.

Thanks!

image credit: US Navy

Post from: EveryJoe

Yielding Wealth Looking for Guest Posters

We’re not terribly excited about the Super Bowl this year (my husband is a life-long, die-hard Giants fan), but we’ll watch it for the commercials in the hopes that the poor economy has resulted in a desperate upsurge of creativity.

Anyway, check out the Carnival of Personal Finance, and my included post about setting up an installment plan with the IRS if you can’t pay your taxes.

Post from: EveryJoe

Yielding Wealth in This Week’s Carnival of Personal Finance

Enjoy.

Happy Friday!

Post from: EveryJoe

Friday Fun Video: Our Trashy Economy

I understand that we all need cash reserves for emergencies but, can being a saver and being in debt be a good strategy? With interest on debt being higher than savings would it be better to pay off your debts first? What are your thoughts?

What a great point.

To some degree, this question is similar the post regarding whether or not to pay off a credit card with a CD. If you have debt that is eating away at your finances through interest payments, conventional wisdom says that it might be a good idea to pay it off quickly and then start saving. However, I still maintain that you can work toward both goals at the same time. Getting in the habit of saving is almost as important as saving itself.

In this economy, having some sort of savings is important. But it is also important to get rid of debt. Here is what I suggest if you are trying to figure out whether to build up savings or pay down debt:

1. Figure out how much extra you have each month.
2. Take 75% to 80% of that extra money, and use it to pay down debt.
3. Take the remaining 25% to 20% of that money and use it to build savings.
4. If you have a larger amount that you can put aside for these efforts, consider tweaking so that maybe you have an 85% to 15% ratio of debt pay down to building savings.

What do you think is the best course of action in this economy? Build up savings or pay down debt?

Disclaimer: I am not a financial professional. Any information you get from this site is not intended as advice. It is likely to be incomplete, and it may not apply to your individual circumstance. Do your own research, consider your situation and/or consult a professional before making money decisions.

Post from: EveryJoe

Build Up Savings or Pay Down Debt?

At any rate, this is just more proof, I hope, that Americans are starting to look at their spending and saving habits and make some changes for the better. If anything good comes of the current financial crisis and recession, it will be that some Americans will do some introspection and change the way they think about money.

Do you think that this recession is causing people to re-evaluate their personal finances?

Post from: EveryJoe

State Lotteries Dropping in Popularity

Best wishes for you this holiday season.

image credit: Miranda Marquit

Post from: EveryJoe

Merry Christmas from Yielding Wealth!

Enjoy.

I Want to Be a Consumer

“And what do you mean to be?”
The kind old Bishop said
As he took the boy on his ample knee
And patted his curly head.
“We should all of us choose a calling
To help Society’s plan;
Then what do you mean to be, my boy,
When you grow up to be a man?”

“I want to be a Consumer,”
The bright-haired lad replied
As he gazed up into the Bishop’s face
In innocence open-eyed.
“I’ve never had aims of a selfish sort,
For that, as I know, is wrong.
I want to be a consumer, Sir,
And help the world along.

“I want to be a Consumer
And work both night and day,
For that is the thing that’s needed most,
I’ve heard economists say,
I won’t just be a Producer,
Like Bobby and James and John;

I want to be a Consumer, Sir,
And help this nation on.”

“But what do you want to be?”
The Bishop said again,
“For we all of us have to work,” said he,
“As must I think be plain.
Are you thinking of studying medicine
Or taking a Bar exam?”
“Why, no!” the bright-haired lad replied
As he helped himself to jam.

“I want to be a Consumer
And live in a useful way;
For that is the thing that’s needed most,
I’ve heard economists say.
There are too many people working
And too many things are made.
I want to be a Consumer, Sir,
And help to further trade.

“I want to be a Consumer,
And do my duty well;
For that is the thing that’s needed most,
I’ve heard Economists tell.
I’ve made up my mind,” the lad was heard
As he lit a cigar, to say;
“I want to be a Consumer, sir,
And I want to begin today.”

–Patrick Barrington

Post from: EveryJoe

Poem: I Want to Be a Consumer by Patrick Barrington

Go over and check it out.

Post from: EveryJoe

This Week’s Carnival of Personal Finance Is Up at the Frugal Duchess

Anyway, now alternatives to the auto industry bailout are being considered, and there are plenty of people insisting that the sky is falling. (It’s probably not.)

But I’ve got better things to do. Like deliver your Friday Fun Video.

Happy Friday!

Post from: EveryJoe

Friday Fun Video: Maybe the Auto Industry Could Use Bailout, The Wine