Money Coach Gives Tips Ahead Of Tax Filing Deadline
MICHEL MARTIN, host:
I'm Michel Martin, and this is TELL ME MORE from NPR News.
Coming up, for Women's History Month, we speak to Leta Andrews. She's chalked up the most wins of any high school basketball coach in the country. We'll find out how she maintains her edge.
But first, there's now just over a month left before our annual date with the taxman. This year, individual returns must be filed by Monday, April 18th. So the procrastinators among us have an extra weekend to get their returns in order.
But money coach Alvin Hall, our regular contributor on matters of personal finance and the economy says, why not use the time organizing your tax return to organize your finances overall? Kind of like a spring cleaning for your financial house. And he's with us once again to tell us how to do that. Welcome back, Alvin.
ALVIN HALL: Thank you. Glad to be here.
MARTIN: Now, why do you think that the tax season's a good time overall to take a look at your personal finances? Some people might say, just let's wait till the anxiety of that thing is over and behind us?
HALL: But in order to prepare your taxes properly, you need to look at all the spending you've done for the past year. Whether it's contributions to your 401k plan, whether it's going out and spending money on clothes, how much interest you're paying. So you get a really good overall picture of how much you've spent. So now is the time, if you want to be responsible to not only look at your taxes, but look at your overall spending to see where you are.
If you made any financial resolutions for the new year, here is a point for you to check yourself to see where you stand relative to what you did last year as well as your progress in the first quarter of this year.
MARTIN: How would you recommend that you get started? I mean, a lot of people used the beginning of the year, say, the first quarter to do kind of a self-audit. Like, they keep track of every expense that you make. But my guess is a lot of people may have been good for the first month, maybe even the second. But by month three, they've kind of put that little notebook in the back of their briefcase or handbag and have forgotten about it. So what should you do if you haven't been keeping really careful record to this point?
HALL: When you start looking back over your tax receipts and gathering that information, start thinking about the three best things you did with money over the past year and the three worst things you did with money over the past year. Did, for example, you rack up a lot of credit card debt? Were you late on paying bills? Did you put money into your kids' 529 savings plan?
Look at the best and the worst things and then look at your behavior in the first quarter of the year and see if you're going back to all those old patterns. It's so easy, Michel, to slip back into those comfort zones, where everything seems magical and the decisions seem so easy and thoughtless. And it's the thoughtlessness part of the decision that makes them bad.
MARTIN: Exactly, though, what should people do? You know, some people kind of automate their finances. They have their, you know, things on, like, a program, a computer program, or something like that. What is that just isn't you? What do you recommend? Just get the paper and pad out and what should you put on that paper and pad to kind of get yourself back on track?
HALL: You should put all of your credit card charges. And I like for people to look at all those charges and then check in your wardrobe, check in your bureau to see what you wasted money on, what still has price tags on them. I am also a really big fan of using these tax programs to preplan. I think when somebody says, oh, I was so shocked when I owed taxes this year, that that shows that you have not done correct preplanning. With all of these tools available these days, people should know what they're going to pay in taxes within 5 or 10 percent before the tax date comes around.
MARTIN: What about the other way? You know, some people really look forward to getting a big tax refund. They're really excited about that. But you're saying that could also be a red flag. Why?
HALL: Well, a lot of people - and I sort of know where this mindset comes from because when I was younger I had the same attitude. The truth is that this ability to essentially ignore this accumulation of tax also comes back to bite you in a different way.
As soon as you get that money, what you start thinking is, what can I do to make myself happy? You don't think about, how can I use this money to add to my net worth? You think about what I'm going to buy. So I tell everybody, if you're going to use this as a form of enforced savings, then use it in a way when you get your hands on the money, to help build a more financial secure future for yourself.
MARTIN: So, like, put it into a certificate of deposit, put it into the 401K, put it into the 529 plan. If you're going to use it as savings, then actually treat it as savings.
HALL: Exactly. Or even use it to make an extra payment on your mortgage. That's another way you could use this money in a very positive way.
MARTIN: You know, Alvin, again, you're always good at talking about how, you know, emotions and money are connected. I mean, one of the things you like -will say, you know, money isn't money, it's the feelings behind it.
HALL: That's right.
MARTIN: So, how do you recommend the people master, you know, those kinds of emotions, or at least try to start wrapping their hands around it?
HALL: I think you simplify the process of approaching taxes and dealing with your money. There's no reason you have to understand everything at one time. A better way is to approach one thing every day or one thing every other day. I almost like the every other day approach, especially when you find this very stressful because then it gives you some breathing room.
You say, today I'm going to accomplish this. I'm going to get all my receipts together and I'm going to review how much I spent on my credit cards. I'm going to see how much interest I paid over the month. And every other day you attack a problem.
By keeping it simple, you give yourself the ability to understand it, to comprehend it, but also to better manage the stress associated with money. And there's always stress associated with money when you don't have enough of it. And today, many people are really struggling because - due to cutbacks in jobs, layoffs, they just don't have as much money as they would like.
MARTIN: And I guess, finally, people at the other end of the spectrum, people who have complex finances, let's not forget them, perhaps this is a good time of year to do what?
HALL: To get financial help. People like that should go and get a great accountant who can sit them down and help them start the process of preplanning before April 18th rolls around. A well-made plan will help the whole process go much more smoothly for you and give you a picture of how not only you can handle your tax payment this year if you have taxes due, but also how you can lessen some of the anxiety about taxes in the upcoming year.
MARTIN: Alvin Hall is our regular contributor on matters of personal finance and the economy, our money coach. And he was kind enough to join us once again from our studios in New York. Alvin, thank you.
HALL: You're most welcome.
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