Money Management

I have to send the IRS money, but that means I raised my income and didn’t tie up my cash. Keep reading to learn why owing the IRS doesn’t upset me. 

Many people receive tax refunds each year. In fact, the average refund in 2023 was $2,903 as of the week ending March 24, 2023. That’s a substantial amount of money, and it means many people look forward to filing their taxes so they can get a big check.

I am not one of those people.

In fact, I end up writing a big check to the IRS each year, and this year I’ll be writing an even bigger one out of my checking account While this may sound like it’s not very fun, the reality is that I’m happy to have to pay when the tax deadline rolls around (April 18 this year). There’s two reasons why that is the case.

1. Owing a lot in taxes means my income has increased

The first big reason why I’m very happy to owe the IRS a lot of money this year is because the fact I have to pay a lot means that my income has increased.

Since I am self-employed, I send in quarterly estimated payments to the IRS every few months. My estimated payments are based on what I made and how much I owed in the prior tax year. If my income goes up, the estimated payments will not be enough to cover my full tax costs.

That’s what happened to me this year, and in most years. As I have made more money, my estimated taxes have not been sufficient to cover the amount due for the upcoming year. I’ve also moved up into a higher tax bracket so that means I end up owing even more.

While I’m not necessarily happy to be paying the government extra, the reality is that with a progressive tax code, higher earners pay more. So, I’m happy to owe more money since it means my income has gone up. I’d much rather have that outcome than make less than I did before, even if that meant I’d get a refund.

2. Having to write a check to the IRS means I didn’t provide the government an interest-free loan

Another big reason why I am happy to owe the IRS money is because having a tax bill means I didn’t give the government an interest-free loan.

Each year, I try to pay the minimum I need to in order to avoid penalties. I don’t want to give the IRS anything extra above and beyond that until my taxes are actually due. The IRS doesn’t pay interest when you pay taxes early, so I’d rather keep my money and put it into savings where I can earn returns on it until I have to send it in.

The money also remains accessible to me that way so I can use it if I need it — which wouldn’t be the case if I sent it to the IRS and had to wait until after I had filed a return and secured a refund to gain access to my own cash.

For all of these reasons, I’m happy to owe the IRS money this year and I hope I keep owing it a lot every year for a long time to come.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

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Dave Ramsey says you should save 3% to 4% of your home’s cost for closing costs. Here’s what to consider if you’re an aspiring home buyer. 

If you are buying a home, there’s a lot you need to know to be ready for the transaction to be a success. And, one of the most important things to be aware of is just how much money you are going to need upfront.

Most people know they will need some type of down payment in order to qualify for a mortgage loan. But, beyond that, there are other expenses as well — and Dave Ramsey has an important recommendation about getting ready for one of those costs.

Ramsey’s rule of thumb for new home buyers

According to Ramsey, it’s important to be able to come up with enough money to cover your own closing costs. And, there’s a specific amount he recommends being ready to spend.

“Saving 3-4% for closing costs is a good rule of thumb — just to be on the safe side,” Ramsey said. He explained that while some sellers cover these, you can’t necessarily count on that happening and you very likely will be asked to bring this money to the closing table before you can take ownership of your new house.

You also may not find out exactly how much money you are going to need until very close to the time when you must have the funds ready. “You’ll get a better idea of what your costs will be when you receive a loan estimate form from your lender after you apply for your mortgage. Just be aware that these can change before it’s time to close on your home,” he said. “You should receive your final closing disclosure form at least three days before closing.”

Should you follow Ramsey’s advice?

Ramsey is absolutely 100% correct to stress the importance of saving money for closing costs, and he’s pretty spot-on with the amount he suggests you will need.

The reality is, many people who have not purchased a home before are shocked at just how high these costs are — and they may be unprepared to come up with several thousand dollars for this additional expense after having saved for a down payment.

Many lenders know that coming up with closing costs is hard, so they may advertise loans that don’t require this upfront spending. But, the reality is, these costs have to get paid one way or another. Usually, that means either the lender charges you a higher interest rate if they don’t charge upfront closing costs. Or, you end up borrowing for closing costs and that amount gets added onto your mortgage.

Neither of these options is good, as it means your loan is going to end up being more expensive over time. In order to avoid paying for the costs of your closing for decades and substantially increasing these costs due to added interest and higher payments that result, you should be ready for this expense when you buy.

That may mean you need to put off your home purchase for a little longer while you save up the extra cash. Although that may not sound fun, it’s important if you want your home to be a good investment and if you want your mortgage to be affordable over the long run.

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Some dog owners would pay the sticker price of a brand-new Toyota Corolla to save their pet’s life. Find out how far owners will go to rescue their furry friends. 

He tripped over a curb in broad daylight. That was the first sign something was wrong with our yellow lab Maestro, who was only 3 years old. We took him to the vet, who told us Maestro was going blind. Surgery might fix him — maybe — but it would cost us over $10,000.

We paid up, but boy, did it hurt.

Soon after, Maestro relapsed. After conferring with our vet, we decided not to pay for another round of treatment. Would a lethal diagnosis have changed things? Maybe. American pet owners like to tell themselves that pets are family, and there is nothing they wouldn’t do for family, but is that true?

According to a recent survey by Lemonade Insurance, pet owners will go far to save their pets in a life-or-death situation. Different factors influence their decision. Are they saving a dog or a cat? How old are the owners?

Here’s how much Americans would pay to save the lives of their furry friends.

Dogs vs. cats

On average, pet owners would spend $6,060 to save their pet’s life. That’s over $1,500 more than the average American has in savings. Americans value their pets’ lives highly — possibly enough to take on debt.

Dog owners would pay the most. On average, a dog owner would pay $8,292 to save their dog in a life-or-death situation. Of those surveyed, labrador retriever owners were willing to spend the most ($27,500). That’s more than it costs to buy a new Toyota Corolla!

While not as generous, cat owners are still willing to spend big. On average, cat owners would pay $3,828 to save their cat in a life-or-death scenario. Russian blue owners would go so far as to pay $18,226 on average: premium treatments for a premium cat.

Before we go pointing fingers — are dog owners better than cat owners? — it’s important to remember that many factors influence how much owners are willing to pay. For example, dogs are typically more expensive than cats when it comes to food and healthcare. Dog owners might be used to paying more for their pets in general.

I can attest to that. My family’s dogs have gone blind, battled cancer, and had their stomachs sliced open. Cha-ching. Cue the vet visit.

Older vs. younger owners

Younger owners claim they would pay more to save their pets. A lot more. Here’s a quick breakdown of how much each generation is willing to pay:

Non-parents surveyed were willing to pay almost twice as much as parents. That’s not too surprising. Kids are expensive; the cost of childcare has risen throughout the COVID-19 pandemic. Though pets are important, they typically take second place to kid-related expenses like housing.

Pet ownership is expensive

It’s getting pricier to own pets. According to data from Rover, the cost of owning dogs and cats has risen by 12% and 8% this year. What was once $1,000 worth of care now costs as much as $1,120.

Each year, pet parents must pay more to access life-saving treatments.

Pet insurance can bring down costs

More than 4 in 10 pet owners doubt they could afford to save their pet’s life, according to Lemonade. At its best, pet insurance makes ownership cheaper. Accident policies pay for emergency treatments, and preventive policies pay for regular maintenance like checkups.

Pet insurance makes some of the costs of pet ownership more predictable. Rather than pay colossal lump sums — and potentially take on debt — owners mostly pay for what amounts to a monthly subscription.

Another option is creating a pet emergency fund. Budget a small amount each month toward saving for emergency pet expenses. Keep the money in a high-yield savings account to earn interest on cash held. It’s a flexible way to save for long-term costs.

Consider shopping around for the best pet insurance if the following is true: (1) you can afford a monthly insurance subscription, and (2) you cannot afford to pay for expensive pet treatments. Slapping a sticker price on Maestro’s eyesight sucked. My family could have avoided choosing between that and our financial health if our dog had been appropriately insured.

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A lack of pay transparency can be a problem for those searching for jobs and those looking to hire. Read on to learn more. 

In the course of applying for a new job, there are apt to be certain things you want and need to know. These might include the responsibilities the job entails, the hours, whether there’s the option for remote work, and what the pay looks like.

The latter, however, may be information that’s hard to come by. A recent Payscale survey found that only 45% of employers include pay ranges as part of their job listings. And 18% of those only do so when it’s required by law.

But not including a pay range in job listings hurts workers and employers alike. And so hopefully, in time, more companies will get on board with the idea of pay transparency from the start.

The problem with not listing salary ranges

Some companies might keep salary details under wraps to give themselves more negotiating power. Others might keep that information hidden because their plan is to offer a salary based on experience and skill level.

But not including salary details on a job listing is generally not a good practice. And employers who do so might end up getting hurt themselves.

When a job listing doesn’t include a salary range, what might happen is that a company gets plenty of quality applicants, only to have them drop out of the interview process once it’s revealed that the salary at play doesn’t match their expectations or needs. Plus, not including a salary range could limit a given company’s pool of applicants to begin with.

A lack of pay transparency can hurt job seekers, too. A given candidate might go through several interview rounds only to realize weeks later that the wage being offered just doesn’t work. The result? A lot of wasted time.

Think twice before applying to a job with no pay data whatsoever

If you’re in the market for a new job, you may want to focus on listings that include a salary range — and skip over those that don’t. Let’s say you find a job opening that seems like a great fit, only the top salary the company is willing to pay is $60,000. If you’re currently earning $72,000, that probably won’t work. A $12,000 pay cut might mean struggling to pay your mortgage or other bills. It’s a risk you likely don’t want to take.

But even if you’re not looking at a pay cut, your goal in getting a new job may be to snag a nice pay boost so you can do things like pay off your credit cards and start saving for retirement. So if you’re earning $72,000 a year now, it may not be worth it to switch to a new position that will only pay you $75,000. Rather, if you’re making a change, you may want to set your sights on a job paying $80,000 or more.

Of course, in some cases, you might be pleasantly surprised to learn that a job without a salary range listed is willing to pay more than you would’ve expected. But do you really want to put yourself through several interviews just to find out that’s not the case?

Ideally, in time, more companies will get on board with the idea of listing salary ranges in job postings. Until then, you may want to apply for jobs strategically and focus on those employers that are more transparent from the start.

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A few years ago, my car was totaled in an accident. Read on to learn why the insurer gave me a check for less than what it cost to buy a new car. 

Several years ago, I was involved in an auto accident that resulted in serious damage to my vehicle. The incident was not my fault, and I was able to make a claim through the other driver’s auto insurance because the accident was a covered cause of loss.

I had expected insurance to pay for repairs, but that is not what happened. Here’s what occurred instead.

This is what happened after the car accident

After my auto accident occurred, I had to take my car to a repair shop to assess the damage. It was ultimately determined that the costs of repairs were too substantial to be worth paying, so the insurer would not be covering the costs of fixing the car.

Instead, the insurer agreed to pay me the fair market value of my vehicle, which was quite a few years old at the time of the incident. While I was able to haggle a bit and get the insurance company to raise its offer a little bit from what the original amount was, the fair market value of the car was ultimately relatively low at the time since the car was an older one.

The insurer ended up cutting me a check for several thousand dollars based on what the car was worth at the time. Since I didn’t have any other damages, thank goodness, I ended up accepting the amount as full satisfaction of the claim as there would have been nothing to gain by trying to sue the insurer or arguing further. It had paid the legitimate value of the car.

Here’s the problem with what happened

Although the insurer acted fairly, there was a problem. The money it gave me was not really enough to buy a new car that I needed.

See, my car was pretty old as I mentioned, but it was my car and I had maintained it well and I trusted it. So even though it wasn’t worth a whole lot of money, I wasn’t planning on replacing it anytime soon since I drive my cars essentially until the wheels fall off.

Now, I could have taken the funds the insurer gave me and tried to find a comparable used car that I trusted. But since it wasn’t very much money, I would have been looking at very old used cars. And this meant I would be spending a lot of money for a vehicle that would potentially have lots of unforeseen problems and that I wouldn’t be able to keep for long.

Ultimately, I decided it made more sense to use some money out of pocket and buy a new car. Fortunately, I had the cash in my savings account to do that. But if that had not been the case, I might have had to settle for a cheap old used car, and hope it was as reliable as the one I’d had. Alternatively, I would have had to take out an unexpected car loan.

This is ultimately a problem anyone could find themselves dealing with if they have an older car that is totaled. And there’s no real way around it, since that’s how car insurance works. The best thing to do is have money saved for a new vehicle purchase in case this happens to you. That way, you won’t face the stress of wondering how to afford a new car if an accident destroys your current vehicle.

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Wondering where your tax refund is? Read on to see why you may be experiencing a lag. 

So you worked hard to finish filing your taxes, and lo and behold, the IRS owes you money once again. Many people get a tax refund each year, but if you filed your return several weeks ago, you may be wondering why that money hasn’t yet arrived.

There are different reasons why your tax refund may be taking longer than usual this year. Here are some to consider before you panic.

1. You filed your taxes on paper

The IRS states on its website that it typically issues refunds for electronically filed returns within 21 days of receipt. But if you file on paper, your refund could take four weeks or longer to arrive.

Based on recent years, that four-week time frame is probably optimistic. The IRS has been grappling with backlogs from previous tax seasons it hasn’t finished working through. And it’s hard to know whether the agency will prioritize newly filed tax returns for 2022 this season or not. So all told, if you sent in your taxes by mail, you shouldn’t be shocked if it takes more like six to eight weeks to get your money.

Furthermore, there’s always the chance that your tax return got lost in the mail. And so you may experience a further delay by virtue of a lag in getting your return over to the IRS in the first place.

2. You made a mistake on your tax return

The IRS will generally try to reconcile certain tax return errors, like math mistakes, rather than reject a return outright. But some issues might cause your tax return to get rejected, which will inevitably result in a delayed refund. These include claiming a dependent who was claimed on a separate return, entering the wrong Social Security number, or choosing the wrong filing status.

Even if your actual tax return contains all the right information, all it takes is the wrong bank account details to delay your refund. So if you signed up for direct deposit but messed up your bank account or routing number, you can expect it to take longer for your refund to arrive.

3. You didn’t sign up for direct deposit

If you’re waiting for a check from the IRS to arrive in the mail, expect it to take longer than direct deposit. You may have chosen this option if you didn’t have a checking account at the time of your filing or if you felt it would be easier to get a physical check.

How to check on the status of your refund

If you’re tired of sitting around wondering why your tax refund is delayed, one option is to use the “Where’s My Refund” tool on the IRS’s website. You’ll generally have to wait at least 24 hours from submitting an electronic return for this tool to work, but from there, you can look to see what the status of your refund is.

You can also call the IRS if you want to speak to someone about a delayed refund. But during the month of April in particular, you might be subjected to extremely lengthy wait times, so using the online tool could be a much less frustrating option.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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