Color of Money Live (March 21)

Mar 21, 2019

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Thanks for joining me today. The theme today is: 2019 tax season. I've got a great expert here to take your tax questions. 

And as always, love those Thursday Testimonies and general personal finance questions also welcome.

Let's get started.

What is the best way to budget for those expenses that are paid annually, quarterly or even twice a year (property taxes). How do you come up with a reasonable amount to allocate for something that's not a monthly expense, e.g. pet food purchased every three months.

What I do is take the expense and divide it by 12. Then in a separate account -- the life happens account maybe -- transfer that monthly amount each month into the account so that when the expense comes up, you have it already set aside. 

I have always wanted to pose this question to a tax pro. I haven't won the lottery yet, but I figure it's just a matter of time. When the lottery prizes get bigger than usual, as Powerball is now, several questions always come up, and one is this: If you live in a state with a high state income tax rate, can you avoid your state tax by moving to a low- or no-tax state BEFORE you claim the prize? Some experts contend that the doctrine of constructive receipt would apply as of the day of the drawing, but others say that a lottery ticket is not like a bank check; it has no value until it is redeemed and authenticated, and you don't have any income until you actually receive the money. What's the verdict? (This obviously wouldn't apply in states that collect state taxes from all winners wherever they live.)

This is a great question. It is possible that some states might still impose a tax on lottery winnings for recently departed residents. NY has an "accrual rule" and some other state might challenge the residency change under the constructive receipt doctrine. Good luck on a playing the lotto!

And think of it this way, if you win big your taxes help the rest of us he played but didn't win. 

Hi Michelle. We need a new car. My husband (who will be driving the car) wants a brand new car. I, however, do not. Almost everything I read gives reasons for buying used. (Those in favor of new are of the "you don't know what you're getting" variety, which to me, isn't strong enough to sway me.) What can I say to convince him to consider used? Thanks!

I always find it's easier to get a spouse -- or your kids -- to see it your frugal way by showing them the numbers. So show him the money. Run down not just the cost of the car but interest (newer car will cost more if you aren't paying cash), the higher insurance, money lost to returns if you have to withdraw money from an investment account.

Also, find reviews of good, reliable cars and show it to your honey. Consumer Reports just came out with it car issue and has a list of great used cars for good value. 

If all that fails, send him to me. Or tell him I said, late model used cars with the lates safety measures is a good deal. Let someone else take that big depreciation hit. 


I started my son's 529 account when he was about 6 months old. I did it through Fidelity because I had an account and it was easy to do. Now I found out that the "default" 529 there (New Hampshire or Connecticut I believe?) is not well-rated. I'd like to switch to one of the "gold-star" funds like VA or UT. What is the best way to shift these savings? Or should I just leave the Fidelity one alone and start a second account in a better-performing fund?

You are correct that some state 529 plans are better than others due to investment choices and fees. The IRS allows individuals to transfer their 529 funds from one plan to another federally tax free. One point to consider is that if you received a state tax benefit for your contribution in the form of a deduction or credit, you may have to repay this back to the state where you received a benefit due to transferring out. I like your commitment to long term savings for education!

So glad you have a tax expert today--very timely for me! I have a 529 plan (MD College Investment Plan if it matters) for my son who is currently in college. I paid tuition for him last year (2018) but forgot to take a distribution. Can I take it now even though we're in a different tax year?

Distributions from 529 plans are tax free to the extent of qualified education expenses incurred during the tax year. Unfortunately, the IRS requires the distribution to be taken in the same year as the expense. While you cannot take a distribution for prior year expenses, you can still use the 529 funds for future qualified education expense. You are doing a great job helping your son with his education!

This is why I love this chat - everyone offered some great ideas. As a follow up: that Saturday, I washed, waxed and detailed my beloved convertible. One of my neighbors remarked how nice it looked for a 14 year old car and said that if I ever wanted to sell it, he was looking for a car for his son who just received his license. Serendipity foreshadowing perhaps? Fast forward a week later: the car of my dreams appeared online at a price I simply couldn't refuse. And today a very happy 16 year old young man has a shiny Mustang convertible in his driveway and a very happy (50-something) man has a BMW in his garage. This is my next "14 year car." Did I have a bit of angst while signing that check? Won't lie, little bit. But I don't regret it. I work hard and sometimes you just have to treat yourself. Hope you won't be mad at your fellow Terp! :-)

If you paid cash, I'm a very proud of my fellow Terp.

It's taken me YEARS to be comfortable about spending the money my husband and I save. I'm all for frugality but I also now understand that it's okay to treat yourself if all the other financial boxes are checked (retirement fund, college fund if you got kids, no credit card debt, etc.)

So, I'm so glad this forum helped you make this move. And I just LOVE that someone will enjoy your beloved Mustang. 

Please don’t use my name—Schedule A was done away with — couldn’t deduct any employee expenses—already enrolled in 401 at work— any other options for saving for retirement available? Also how to manage taxes if no employee expense deductions allowed — what can help lower taxes when one gets W2

As part of recent tax reform, the deduction for unreimbursed employee expense has been eliminated (as have all miscellaneous itemized deduction subject to the 2% of AGI limit). However, the upside is that the standard deduction has approximately doubled which partially mitigates some of the lost itemized deductions. 

If you still have enough expenses to itemize you can make charitable contributions. That will lower your tax bill and be a service to your community. 

My spouse and I went all in to pay down our mortgage quickly. We cut back/reduced (but did not eliminate) on things like going out to dinner, vacations, spending on ourselves. It worked. We paid if off early. But now I find myself unable to break the habit. In particular, I have a particular aversion to any type of service with monthly/annual fee for service. I see the monthly fee, immediately multiply it by 12 (for the yearly total) and then by 10 to see what I would spend after 10 years, and I am shocked by the number. For example, Amazon Prime. I can't do it. Seems so little, but I think, after 10 years, that's $900! (when all I have to do is wait a little long for the free regular shipping, instead of 2 days) I can't bring myself to pay the $10/month for ad-free streaming music, so I tolerate the ads. I did recently managed to get myself to sign up for a CSA (veggie delivery from a cooperative) - but I am thinking of cancelling it since I can buy the veggies cheaper at a local grocery store. For many of these things, I'm convinced the marketing angle is to do a low monthly fee, and most people don't add it up to see what the yearly/multi-year cost is. I spent so long trying not to be the person sucked into those services, how do I turn off this aversion to monthly/yearly subscription services and enjoy them!

You are me. I hate paying extra for anything.

BUT...if you have checked all the boxes (see previous answer) and you want some of the things with the monthly fee go for it. 

For example, I love anything Star Trek. CBS put the new show on its streaming service. I held out but finally decided to subscribe because, well, I rarely treat myself. I don't go to the movies much anymore. AND...hold your heads, I paid the extra for no commercials. I know right. You are probably thinking who has inhabited  Michelle's body.

But I was sitting there watching the show and very annoyed at the ads every 15 minutes. So I did it. I paid the extra because I can afford the luxury of not being bothered with the ads. 

It's all about doing what you can afford. So if you want any of those things don't fret. It's money well spent because you've save. 

Now if you really don't care or want it then by all means save that money for something that you really, truly want as a convenience.

What if someone hasn’t filed any tax returns for 4 years or so? (A lower-income person.) What should the person do to begin to rectify his/her situation? Contact the IRS; a tax accountant; a tax lawyer?

Read Michelle's column: Can’t pay IRS the taxes you owe? This is the one thing you shouldn’t do.

The filing requirement for most people is if their income exceeds the standard deduction (for 2018) or standard deduction and personal exemption (for 2017 and earlier). It is possible that there may not have been a filing requirement if income is low enough. If there is a filing requirement, it is suggested to speak to a tax accountant (CPA, EA) to help file returns for those years. It should be noted that there are generally no penalties for years which a refund is due. 

You might also want to get the returns done because the person -- or you -- might have qualified for the Earned Income Tax Credit. 

Get a friend to help you. It doesn't have to be a friend who knows a lot about taxes. Just one who has been through your situation and helped you with your list of questions (you have a written list of questions, right?) and you trust to know all your information. I went along with some friends when they went to the IRS with their tax filings three years in arrears. I helped once in a meaningful way. When the first person we talked to said they were only doing current years because it was close to the filing deadline, I pointed out that their oldest year was close to the statute of limitations for claiming a refund, and got that year added to what we would look at when their turn came up. The rest of the time, I was just moral support. And I sat on the floor with their young son and folded paper airplanes to amuse him while they were talking. Mostly, I forced them to show up despite their fear because I told them I was meeting them at the service center. You can have a friend with you on the phone. Just introduce them to the agent and confirm that you consent to have them hear anything that is said to you. You can call them your "note taker" if you like. That is perfectly normal. And it helps with the fear. It really does.

What a wonderful friend you are!

I did something similar. A good friend was had some notices that she owed.  She had been ignoring the IRS because she didn't have the money. I sat her down next to my desk and we called the IRS together. 

The person on the phone was super nice. They helped her set up a payment plan. And wouldn't you know it, she was up for a job with the federal government. And had she not had that payment plan in place she would not have gotten the job. 


What are your recommendations for those who separately file but share a deduction (i.e., mortgage interest when both individuals pay the mortgage payments and are both listed as owners)? Would the deduction amount be split according to who paid the bank? Or does it matter, as long as both individuals are listed as owners and the deduction is not "double counted"? Thanks!

On a jointly held property related to separate returns, the deductions for mortgage interest are generally allocated based on who made the payments. However, the IRS may disagree  with this reporting  and reallocate the deductions based on proportionate ownership interest in the underlying property. The IRS is always reviewing situations where they think that people are attempting to shift deductions around to people who benefit the most.

Last Thursday my boyfriend finished paying off his credit card debt! His New Year's resolution was to clear his credit card by April and he did it faster, thanks to a pay increase he got at his job. Next step is to use the same amount of money he was putting on his card to pay off a personal loan he has had for a couple of years. if everything's good he will be off of all his debts, besides his student loan, by the end of the year! I can't believe we will be free of this monster soon.

Thank you for sharing this testimony. And please encourage him to work on that student loan debt as aggressively as he has the other debt. 

And this calls for some sparkling cider! 

My nephew makes an excellent salary but wants to borrow against his 401k for the down payment/closing costs. I am "the don't know anything" aunt and this is the "new millennial" way of doing things. And yes he could easily save the money for the down payment/closing costs in about six months. What wise words do you have for him? Thanks from his baby boomer aunt

Borrowing money from a 401k does come with a set up tradeoffs. While the borrowing is not considered income, failure to meet the requirement payment schedule would be considered income for the outstanding balance. I have seen clients take 401k loans with the best intentions and then find themselves in a situation where they cannot pay the loan. If they cannot pay the 401k loan, it becomes even more difficult to pay the taxes on the outstanding balance. Bottom line - it may be a wise move but it could be financially painful if life does not go as planned.

Hey Auntie. So let me be the I think I know everything aunt for you.

Tell your nephew this: "I consulted this really smart personal finance columnist for The Washington Post and she said you better not touch that 401 (k) money. Yes, you will be paying yourself back but taking the money out of the market may mean losing some returns and over time that loss would add up. Further, as another expert on the chat said what if you lose your job? If you do, the money become due in 60 days, plus the 10% penalty for an early withdrawal. The risk to your retirement is too high honey. So be patient. Wait and save the money for the house without touching your retirement money. Based on what you tell me that's just six months. Retirement money is for retirement. Think this way for the rest of your career and you will have a substantial retirement account when you are ready to retire. Makes sense, honey?"


Hi Michelle, I just wanted to pass on a lesson learned: If you’re expecting to inherit proceeds from a mutual fund, timing is the difference between tax-free and tax liability. My mother passed away April 2016, but her mutual fund wasn’t liquidated until 2018 as I executed the complicated estate (rental property, real estate delays, etc.). The fund should have been liquidated prior to her passing and put into a joint estate account, which would have obviated tax liability. (I had mistakenly assumed the fund would pass tax-free.) And of course I received a late 1099-B for 2018 tax liability from the brokerage, which necessitated amended federal and state returns and several hundred dollars in additional tax liability for me and the other heirs.

Assets held onto a death receive a "step-up" in cost basis to the market value at death which does allow for sales soon after death with little to no tax liability. However, any post death appreciation is automatically considered a long-term gain when the investment is sold. It sounds like you waited some time to sell during a period where the market appreciated but you still benefited from the "step-up" in basis to the market value on the date of death.

We also have Amazon Prime and a few streaming services. I was willing to go for them when I added up the cost of those plus our home Internet and cell phones and realized that the combined cost was less than our (former) monthly cable bill.

Yup, lots of people are cutting the cable cord. 

Are the high interest rate savings accounts worth considering for an emergency fund or do you recommend something else.

Sure, it's find to search for banks with the best rates. Just make sure the institution is FDIC insured or similarly insured such as a credit union. You can look for options at 

My husband had to make a trip to the emergency room about a year and a half ago. He's fine, but we were of course billed for $1,800. He was going through depression at the time and although he told me he paid it, he never did and it went to collections. We have since gotten control of our finances and were finally able to pay that bill off this month. He's excited about his credit score improving, but I'm concerned about what ramifications this could have if he needs to use the ER ever again. Can they blackball him over this and deny him care? It was technically two bills, and from what we can tell, we did pay the hospital for the smaller one, but the bigger one went to a collections agency, so I'm assuming the hospital won't even see our payment or even know we made it (and maybe not care?) This hospital also owns most of the urgent care clinics in our city - could he be denied service there as well?

If your husband is in a health emergency crisis they cannot deny him service. Besides you paid the bill eventually. 

I wouldn't worry. 

The BMW and your response hit home. I would really benefit from having my bathroom redone. I can pay cash. Here's the thing - I started my own business two years ago, with 2 years' worth of savings in hand. I am about $20k up from where I started. But I cannot get over the psychological hump that if I spent that money, even on something that would really help me every day (my bathroom wastes space and is frustrating) I would somehow no longer be ahead in my business. I STILL HAVE TWO YEARS OF SAVINGS! I feel insane but I cannot get past this. Do you have any advice?

Stop being insane :)

Look, even the best of us savers can't save for every emergency. This means if we have a comfortable cash cushion we have to have faith!

And I say this from a person who worries with every dollar spent. It's a daily struggle. 

However, I just keep telling myself, "Self, you are a good steward over your money. Let go. Treat yourself. It's okay."

Now think of that glorious new bathroom where you will spend a lot of time. Every time you use it, you won't have a regret because it makes you happy. 

Sometimes money can buy happiness. 

I'm considering taking a new job. One downside is they don't offer employees a 401k for the first six months of employment. I currently contribute approximately 15% of my income to my 401k. How should I save for retirement during the 8 months this year I wouldn't have a 401k? I'm concerned about an IRA because my AGI is likely above the limit in which you're allowed to take a the full deduction if you had an employer sponsored retirement plan during the year and I'm worried about needing to save my tax returns for the next 40 years so I don't get double-taxed on the contributions when I retire. Would you suggest just putting the money in an earmarked taxable account? Or maxing out my HSA contributions for the year? Or something I haven't thought of?

For people who make too much money for a Roth IRA or a deduction to a Traditional IRA, they may want to consider a "Backdoor Roth IRA Strategy." This strategy requires an after-tax contribution to a Traditional IRA (which is allowed regardless of amount of income) and then convert to a Roth IRA (which is allowed regardless of income). However, this strategy may not work as intended for people who have any existing Traditional/SEP/Simple IRA due to the pro-rata rule which may make part of the conversion taxable. Love your commitment to retirement saving and hope you get enrolled in the 401k as soon as you can!

If you have the funds for a recurring expense, the question, to me, is: will you truly obtain sufficient benefit to be worth incurring it (which is distinct from asking, "How do I turn off my long-held position")? For example, with Amazon Prime if you're willing to wait a few days to obtain standard free shipping you'd get very minimal benefit from Prime even though you can afford it. With the CSA subscription: is the time you'll save shopping worth the recurring cost vs purchasing the items more cheaply yourself? And have you accounted for time away (travel, family visits, etc.) for which you'll pay for the subscription even if you decline to use it?

Great points! Also keep in mind -- and not saying this because the Post is owned by the guy who runs Amazon. Prime comes with other benefits besides shipping. There's a streaming service where you can watch movies, television shows and a music service. 

Still me. He will have to start paying off his student loan only next year. The goal for this year was to clear off all his debts before having to start to pay his student loans and to create already the habit of putting money on debt so that when his student loan will start to kick in, it won't hurt too much. He's never been really into personal finance, but with your help and mine, it's finally kicking in....

Great to hear "Still me." 

I love that you are helping him. And that he listened. 

Like with any bill that ends up in collections: keep receipts (cancelled checks, bill showing $0 balance, etc) proving you've paid off the balance. I'd be more concerned about the old bill resurfacing as unpaid than future medical care being denied when needed.

Really good point. Thanks.

My husband and I are vacationing in the Bahamas. Yesterday I slipped on a wet floor and broke my femur. I don’t want to have the surgery here so have to take air ambulance back to NOVA for $20k. Thank god we have an emergency fund . Folks you never know what can happen to you. Set up that account-just do it.

Wow! I'm so so sorry about your fall. And glad you have the resources to get the help you want where you want it.

Hello! My husband and I have an HSA that we fully funded last year ($6900). We also did several fertility treatments out of pocket, paying from our regular savings (so we have not used any HSA reimbursement). We have enough medical expenses to top the standard deduction of $24,000 so plan to itemize. I know that we cannot receive an HSA reimbursement as well as a medical expenses deduction for the same expense. However, I would like to itemize all the medical expenses (less the 7.5% of income threshold) for 2018 and not use the HSA because I think we will need all our HSA funds to cover this year’s medical expenses. Can I do that, or do I have to take the full HSA $6900 reimbursement before deducting the remainder on my 2018 taxes?

HSA distributions are tax free and can be taken at any time in the future for qualified medical expenses incurred after the HSA was started. You are correct, medical expenses cannot count as an itemized deduction and be eligible for a HSA tax free distribution. Your decision does come with a tradeoff. Do you want the benefit of the itemized deduction currently? or do you want to be able to withdraw more funds from HSA tax free in the future? This is not an easy question to answer and is dependent on how the HSA funds are invested and other medical expenses that might occur in the future.

The last three cars my family has bought have been Honda Certified or Toyota Certified used cars. They were purchased from a dealer, but we still took them to our own favorite mechanic for a pre-purchase lookover. They cost more than buying from a private owner, but far less than a new car. I paid $28,000 for a two-year old Honda Odyssey, with a one-year warranty from the dealer, that would have cost $40,000 new. So that is a possible compromise for the chatter.

Thanks for sharing. Smart.

A local TV station is doing a series on credit scores. this morning, it was recommended people get credit cards to improve their credit scores. Clearly, they have not cleared this series with you. Isn't the best way to improve your credit score to pay your bills on time? The report also recommended getting a person loan to consolidate and pay off debt. I thought maybe they should interview Michelle cause they got this all wrong. Thanks for all the good advice!

You are right and they are right -- sort of.

You are right that the number one way to improve your credit is to pay your bills on time. 

However, people with no credit history so therefore no credit bills to pay on time could benefit from opening a credit account to establish credit. But they don't have to carry a debt. Buy something small. Pay it off before the due date. Do this a few times and then put the card away. Boom. You are rebuilding or establishing credit. And there are some credit unions that offer a credit building personal loan model that is okay. 

But I'm glad you are on the lookout for bad information. 

I've heard a lot of chatter regarding exemptions in light of the new tax laws. Specifically, we've been warned that we should reduce the number of exemptions we claim on the W-4, potentially down to zero, to avoid owing taxes. We're a family of 5 (3 children), is there any rule of thumb to follow when claiming exemptions?

Unfortunately, there is no rule of thumb on the number of allowances to claim on a W-4. However, it is suggested that that everyone review their own situation to see whether they are on track to meet withholding requirements. The IRS does have a withholding calculator to help you figure out how many allowances to claim. Google "IRS withholding calculator". I have personally used the calculator and it is one of the more user friendly tools the IRS offers. 

I retired from state government at 50 (now 53) and have a 457 that I no longer contribute and 401(k) that I currently contribute since I’m working as a retired Annuitant. I also have a Roth IRA with another company that I currently contribute. I have no kids and so I’m not planning a legacy gift. My spouse (54/Retired) have agreed anything left will go to charity. At this point should I convert all accounts to a Traditional IRA to get the tax benefits? I’ve owed taxes each year in retirement, which never happened during the entirety of my 27 yr career.

Roth conversions can be an attractive way to hedge against future tax increases but the downside is you do have to pay taxes at current rates. However, it may be advisable to leave some of those funds in pre-tax accounts which may go untaxed if never distributed during life and ultimately end up with a charity after death.

That is a good reason to buy travel insurance. You might say you're willing risk losing just the price of your vacation, and if you pay by credit card that risk is low. But the costs of a medical emergency can be almost unlimited. An air evac from Europe could have cost six figures. Spending a few bucks for travel insurance is well worth it.

Yes and no. Most people never use the insurance - total win for the insurance companies. And most never need to be air evac from a location.

Still your point is well taken. I'll consider that when I next book a vacation although watch for ALL the caveats on these policies. 

Hi Michelle! My husband and I are midway through the financial fast and it is so hard. But we have had some serious successes - I went to Target for detergent (normally $15 that turns into $150) and left with detergent (and bananas, baby steps). My question is this: my high school-aged niece has had a rough time with substance abuse and got sober last year. I made her a deal that on her first sobriety anniversary, I would take her out for a big deal celebration - manicure, fancy dinner, maybe a movie, the whole nine yards. Well she texted me today to remind me her first anniversary is Sunday! Which is in the middle of our fast. In your book you say not to do birthday presents because it’s against the point of the fast. But this seems more important than a birthday. And I feel like I made her a promise. I say I can treat her to a celebration, my husband says no, and we agreed to defer to you. What do you think?


Read Michelle's column: Time to reboot your financial life? Try this 21-day fast.

Do this. Explain to your niece what you are doing. See how she responds to you postponing the celebration for a few more weeks. 

But if she sounds really down or bummed, I would keep your promise. I think in the spirit of the fast you can break it for this one thing. I hate for people to break their word. 

Because the ultimate goal of the fast is to get you to spend on things that really matter or that you need. You needed the detergent (not the bananas). And you really value the steps your niece has taken to stay clean. That's worth celebrating. (Although you could tone it down just a bit and still keep your promise). 

Michelle, Would you be willing to introduce him? Just very curious about his expertise. Thanks and regards.

Hi - My name is Eric Bronnenkant and I am currently the Head of Tax at Betterment where my main role optimization for client investment portfolios. I love my job and am very excited to come to work every day. My experience includes ~15 years of financial planning/tax strategy working for Ernst & Young. My certifications include being  a Certified Public Accountant and a Certified Financial Planner. I have been published as a contributing author to a the Ernst and Young Tax Guide. I am happy to answer any other questions!

By the way, the bios of my guests are always on the chat page. 

You should work backwards. How much can you afford? Then look at the cars available in that price range. The used cars will probably look much more desirable.

Like this. Thanks.

Certain popular cars (Toyotas, Jeeps, trucks in general) do not depreciate as much in the first two-three years of ownership. Especially if car sales are slowing, carmakers may be putting some nice rebates on new cars. My last two cars I bought new during recessions, because any used cars that were comparable were too high priced compared to a brand new one. Yes, by all means run the numbers for a new vs. used, but don't be surprised if you come out ahead by buying new with 0 miles on it vs. used with 50,000 miles on it.

You do have a point. Just run the numbers -- always.

I have the same problem! I save and save and save, and when I'm able to spend the money on something I need (or heck, even something I want), it's so hard to let go! have the money, you need the bathroom fix. Do it! I lived in my house for a year before doing a much-needed renovation. The reno got done this week and I'm so happy I could cry. I'm also so irritated with myself for putting it off because I'm afraid to spend.

Baby steps. You did it when you were ready so no regrets. 

Don't quit it! Think of all the local farmers you'll help out. We did one last summer and enjoyed it -- had items we'd never had before. Well worth it, and again, think of the farmers.

Yes, worth thinking about.

You started a little bit of a debate last week, and I'd like to hear your expert's opinions. Most Americans file relatively simple tax returns, without even itemizing deductions. The IRS ALREADY HAS the information that we are required to enter into the tax forms that we are required to file. The IRS could provide us with pre-completed tax forms that we could just sign if they were correct, or use as starting point for revisions and corrections. But the multi-billion-dollar tax prep industry has lobbied aggressively to block the idea. Taxpayers would always be able to file the returns that best serve their interests. But what's wrong with starting with pre-filled forms?

There are a number of countries and a few states that use pre-filled tax forms. They could definitely go a long way to making tax filing an easier process. Hopefully, the tide will change in Congress to promote a simpler filing process to increase tax compliance and make for an overall better filing experience.

For several years my husband would comment on following a budget. But he would never work with me in making a budget. We weren't living on a shoestring but we didn't see our balance grow, either. As we began to keep more records electronically, we were able to easily track spending. After a couple of years of him lightly nagging and me suggesting we actually make a budget, I finally cornered him: use all that information you're putting into the computer and print out a year's worth of information so we can actually make a budget.... or shut up about it. So we did..... I rounded every column up to allow for inflation. I also insisted on a cash allowance for both of us----that could be used for whatever we want with no explanation needed. To go over the allowances in any category required discussion and consensus. I insisted we switch over to cash.... credit cards (yes, we'd always paid them in full each month) were only for minimal use. I go to the bank at the beginning of each month to get all the cash allowed and divide it into separate envelopes right then and there. In the first year alone, our $25K (not house, utilities, car or insurance were included) went down by $5K. Now, 15 yrs later, we have the same allowances in spite of inflation, and I return at least $1K from grocery $ back to the bank accounts each Dec.---some years even more if we've not hosted any big parties or had lots of guests at holidays. And now, the gas money each month (since I'm not schlepping kids all over creation) is also our get-away travel $ for 2 - 3 day trips for fuel and hotel. Eating out still comes out of personal allowance. And instead of just having some work-related retirement, we now have solid-6-figure amounts in each of 3 different savings/investment accounts in addition to a healthy 5-figure at-hand bank account. And the house is paid off, all the college tuitions are over and done, my last (less than $20K) car was cash and the new truck replacing the 16yr old truck is going to be cash later this year. And, maybe the best of it all, we consume less material junk and have less junk to get rid of. What we buy has REAL purpose and value. And I sleep better at night. It can be done..... but it takes long-term commitment and a put-up-or-shut-up attitude toward the less motivated of us.

Wow! Just Wow!

Is it useful to calculate deductions anymore even when you know they won't be anywhere near the threshold of the standard deduction? My tax software had me dutifully typing and checking all my deductions even though I *knew* they'd be thousands below the standard deduction. The software said, "Well, you may have some deductions you hadn't thought of." I didn't. Should I keep doing this even if it's useless - could it somehow be useful in some future year?

I encourage people to go through the process to review all their itemized deductions to see if they will benefit if they end up being higher than the standard deduction. You do have a good point by noting that if you are no where near the standard deduction that it may not be worth your time to go through the process. I do not want you being inefficient with your time but I also do not want you missing out on any tax benefits.

So sorry but have to wrap it up today. Thank you all for joining me today and for your great tips.

And big thanks to Eric. He's also promised to answer some tax questions he wasn't able to get to. I'll print in either a column or newsletter, which I hope you subscribe to.

Take care and see you next week. 

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Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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Eric Bronnenkant
Eric is the head of tax at Betterment. His more than 15 years of experience include working for EY (Ernst & Young), Fidelity and as an adjunct tax professor at Seton Hall University.
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