TAKE CONTROL: THE GOVERNMENT AND YOUR MONEY

The Government and Your Money

Two issues have arisen recently concerning the government, both at the state and national levels, which are a concern for taxpayers when it comes to their finances. The first is the Missouri Department of Revenue realized in September that wage earners in the state were not having enough money withheld from paychecks to cover their Missouri state tax liability. The withholding error will not change a taxpayer’s Missouri state income tax liability, but hundreds of thousands of filers out of the three million expected state tax returns could find that they will not be receiving as large of an income tax refund, or worse yet could owe money when they were expecting a refund, to make up for the shortfall in withholding throughout the year. The second issue is will government shutdown affect tax refunds? The IRS has stated that a prolonged federal government shutdown could lead to delays in payouts of federal income tax refunds to millions of Americans who are owed money. In addition, taxpayers are not currently able to speak to a live tax adviser concerning tax related questions due to the shutdown. Individuals and businesses who owe money when filing their federal income tax returns are still expected to have payments in by the April 15th deadline.

Learning about these two unfortunate situations right in the new year is frustrating! We may feel powerless to change the circumstances that face us. Yes, we can call and write our elected representatives and let me know how we feel about the government being shut down. But many times, it seems as those representatives are NOT only literally far away from us, but figuratively as well, with their own agendas that go far beyond a contact from a constituent. And while a state bill has been filed to extend the deadline for paying any money owed until June 15 without penalty due to the withholding error, there is no guarantee that the bill will pass and even if it does it will not allow the department of revenue to go back in time and solve the problem of the withholding error in the first place.

So, Where Do You Go From Here?

You can’t manage issues that seem beyond your control, so how do you protect yourself and your family from the next government shutdown or next state error? The first thing you should do is take stock of your current financial situation:

• Do you know how much you earn every week, or month, or year?
• When was the last time you really thought about how much is deposited in your bank account every time you get paid? You would be surprised at the number of people I speak with who have no idea how much they make until they get their W2 every year and file their taxes.
• Do you know how much you pay in bills every month? Most people have a general idea of their mortgage or rent, but if you think about it do you know how much your cable, cell phone, or utility bills are each month, not to mention credit card, car payments, and car insurance?

The point of this is not to shame you if you don’t, life is very busy and honestly most of us wouldn’t be able to tell someone who stops us on the street what our last cell phone or credit card payment was unless we just got done paying it or saw it pulled out of our bank account. The point is that without a way to track what comes in and gets paid out each month, you have no way of knowing where you’re at financially and can’t prepare yourself for the next time something happens that’s beyond your control. By creating a budget, it will allow you to see where your money is going and highlight areas to concentrate on. A budget is not something that should limit you, it should be something that actually gives you the freedom to spend. I’ll explain what I mean.

Hopefully everyone knows what a personal budget is, it’s a list of your income and allotted expenses for the month. Let’s say you sit down and write out your monthly income and list out your monthly expenses. Hopefully, by the end of the month you have something left over to add to an emergency fund, savings, or investing. Don’t worry right now if you don’t, but if you don’t write things down you’ll have no way of knowing what to fix. So, you’ve written your income down and listed all your expenses. You see on your expenses that you’ve allotted $400 per month for groceries. You go grocery shopping the next day and you know you have $100 to spend that week, assuming a standard four weeks in a month. You’ve given yourself permission to spend that money. According to your budget you can’t spend over that amount, but as you are going down the store aisles you are allowing yourself to buy whatever you want, as long as you don’t go over the $100. Once you hit that $100, you’re done for the week. By tracking what you spend, whether it be groceries or utilities or clothing, you are better able to control your own household expenditures.

A Budget is a Living and Breathing Thing

So, how does making a budget and tracking your spending habits relate to what is going on at both the federal and state levels? Well, you must start somewhere when you feel like you don’t have control over what is going on. By really looking at your income and expenses, you can see what you need to concentrate on to start to build a solid savings to prepare for times that are going to be beyond your control. Do you think your income is too low? Well then you can ask your boss if you can take on more tasks or work overtime, or perhaps look to supplement your income with a part-time job. And speaking of your job, if you do receive a large refund every year during tax time you may want to talk to your payroll department about changing your withholding allowance. A large refund means that you’ve given the government an interest free loan to use your money all year, when you could use that money each month instead of getting it all back in one big chunk. When is the last time you examined your monthly bills? Maybe it’s time to shop around and see if you can get a better deal on your cell phone plan or car insurance. And remember, a budget is a living, breathing thing, it’s not static. You’ll want to write down your income and expenses each month to determine if you are making progress towards your financial goal. By actively taking part in decisions that you can control, you won’t feel so helpless during times when things are beyond your control.