Tax Returns, Vacations, Lottery Winnings, and Values

Well, it’s that time of year again. In just under a few weeks, your taxes will need to be filed (if you haven’t done so, already.) And, as we all know, the filing of taxes often means receiving tax returns (though definitely not always.)

As people get tax returns back, they use them in any number of different ways. Some folks have plans for their tax returns and some don’t. Of course, I think it’s important to have the same type of awareness, thought, and planning in regards to your taxes and tax returns as for everything else in your financial life. If you’re not giving any deeper thought to your tax returns, you might be missing out on an opportunity to use your taxes to make a significant, positive impact on your overall financial life.

Finding Shelter in the Storm

I love documentaries. I consider myself a life-long learner and I enjoy feeding my head as much information as it can hold. If I’m going to sit in front of my television, there’s a good chance I’ll be using that time to do something that I consider at least reasonably productive. I have Netflix and some of the many documentaries one might find on my Instant Queue list are documentaries about finance. There are a number of interesting documentaries out there, like “I.O.U.S.A,” “Inside Job,” “Capitalism: A Love Story,” and “Maxed Out,” to name a few.

Last night, I watched “Inequality for All.” I found it fascinating and incredibly informative. I’d recommend it. Now, in the efforts of transparency, I have to say that I found the political ramifications of it interesting. But this post isn’t about politics. What I found FAR more interesting and relevant about the film was how it made me re-think some of my responsibilities as someone who is trying to help people exist and maybe even thrive in what is a very tough economy.

The Wheel is Perfectly Fine As It is

When I was in the phase of my life where I was repairing my financial state from utter ruin, it lead me into a phase where I was also reading a lot of books on personal finance management. There’s a lot of good stuff out there. And then, years later, when I was working on my certification by CUNA to do financial counseling at the credit union, I was reading a lot more. I still read personal finance books today.

Through all of my reading, I feel like I’ve learned a lot. But one of the things I’ve learned that might be the most surprising is that personal financial management doesn’t require re-inventing the wheel. In fact, the principles behind financial wellness have basically never changed. Whether you’re alive in 2014 or 1914, the principles for successful personal financial management are exactly the same: You work out a budget; You utilize a system to make sure your expenses stay within that budget; You save up money to cover unexpected expenses or events. That’s it. The philosophy is so simple. It’s really not rocket science. So many books and articles out there are basically saying the same things, just dressed up a little differently. I sometimes think about writing a book, myself, but I’m not sure what needs to be said that hasn’t been said, already. Budget. Track. Save. Succeed.

Understanding Cash Flow

Cash flow is a simple concept, on paper. Cash flow is the net result of the relationship between your income and your expenses. If you have more income than expenses, then you have a positive cash flow. If you have more expenses than income, then you have a negative cash flow.

When I counsel people and talk about the “Math and Discipline” approach to financial health, the “Math” part is all about cash flow. We all have cash flow happening, whether we think about it or not, pay attention to it or not, or manage it or not. That’s one more reason why having a budget is so important, because it sets up structure for our cash flow. A budget sets expectations and goals in order to create positive cash flow each month; and if our cash flow is positive, there’s a good chance we’re at least doing OK, financially.