Wednesday, November 13, 2013

The Novel Idea Of Living Within Your Means

I prepare a lot of tax returns.  It's the bulk of my job description, though Intern Wrangler competes strongly during the spring.  Sometimes doing tax returns is weird because I get to see into the financial lives of people I do not know and learn a whole lot about them just from the pieces of paper they turn over to me.  I see varied income situations, business successes and failures, and very unique dependents' names.  But there is one situation I sadly have seen several times on tax returns and it just blows my mind.  It goes like this:

Taxpayer occupation: doctor, lawyer, fill in the blank professional
Annual income: somewhere between $300,000 and $500,000
     -invoices for sales tax deduction showing brand new luxury car for him/herself and brand new hip car for dependent, with loans taken out for both
     -student loan interest, sometimes for taxpayer him/herself and dependent at the same time (wince)
     -mortgage interest and real estate taxes on vacation home
     -two or sometimes three mortgage interest statements for primary residence
Tax to be paid when tax return filed: around $3,000 since withholding came up a bit short
Taxpayer reaction: shock and inability to pull the amount from anywhere
Result: questions about how to pay their tax bill on a credit card

I, of course, put on my professional hat (you know, the green visor that stereotyped accountants wear in movies...just kidding) and politely inform them that they can indeed pay their tax bill with a credit card, but the IRS charges a fee for doing so, etc, etc.  What I really would like to say is any or all of the following:

Do you realize you make six digits?

Didya really need the newest Mercedes or was your Lexus doin' just fine?

Did your teenage daughter really need a brand spankin' new Mustang?  I mean, I got to school super in an old Corolla named Squirrel.

Why exactly do you have a vacation home when you already have a primary residence on which you have three mortgages, with interest alone totaling more than I make in a year?

And you are currently freaking out because you can't pull $3,000 from anywhere to pay your tax bill?

Did I mention that you make six digits?

Whooosaaaaw, deep breaths.  Considering even a smidgen of these unsolicited comments would be completely unprofessional, I just stick to the calm coaching about which would be worse, credit card fees and interest or IRS late payment penalties and interest.   What a dumb situation to be in when you make almost half a million dollars a year.

DEAR PEOPLE!  I have the secret to happiness for all you middle class folks that are so blessed with a steady, good level of income and yet are so financially stressed and unhappy: try living within your means.   And I don't mean folks making half a million dollars like my client above.  I mean truly middle class families making well under $100,000 a year.  Do you realize how rich you are compared to most of the world?   For goodness sake, let's try to manage it well instead of acting like we are all stressed to death and just don't have enough money.  I'm not talking about getting out of debt here, though that obviously plays a big part in financial stress relief. I'm talking about structuring little daily financial routines all the way up to giant decisions like how much house to buy in such a way that you are not getting in over your head.

Live in a house you can afford, really afford.   Our house cost five digits, contains over 2000 square feet, is almost 70 years old and has not imploded on us yet.  Oh, and our mortgage payment is less than $700. It's a pretty stellar set up.

Drive a car you can afford and pay off.  Then keep that paid off car until it dies or your needs for size or utility change.  And for goodness sake, if you drive a fancy commuter truck that gets 12 mpg and has never nor ever will haul, pull or trailer something, or even as much as have mud boots stuck upside down between the cab and the bed, you should get rid of that truck stat.

Don't buy your teenager a brand new car. Just don't. There are life lessons to be learned here.  My 17 year old sister drives an old, beige, hail pocked Honda Accord that a lot of teenagers wouldn't be caught dead in, but you know how she feels about it?  She's just grateful to have some wheels, calls it the Hondatron, and says the pock marks just add "texture" and give it good aerodynamics like a a golf ball.  That, my friends, is the kind of teenager you want to raise.

As long as student loans are in the picture, give them a higher priority than flashy vacations.

Or just don't take flashy vacations.  I've never been to Disney World and honestly I think my memories of mom + daughters nights watching Cinderella on VHS are much more special.  Not to mention several thousand dollars cheaper.

Folks, I can tell you from firsthand experience that living within your means is da bomb.   It allows you to take care of budgeting and bills in a matter of fact, "no biggee" attitude, then close the laptop or checkbook and not worry further.  For us, it allowed us to exit Trent's entire church job/paycheck for him to go to seminary with no freak outs whatsoever.  Between losing that paycheck and getting raises at our remaining jobs, it was about $15,000 net income gone.  Kablam.  And it was no. big. deal.

People, I want this peace of mind for you. It takes intention and what you perceive at the time as real sacrifice to get there, but let me tell you, once you get there, you can throw financial stress out the window and it is so flippin awesome.

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