Don't Pay "Stupid Tax"!

Paying taxes is the expectation of Christians, but paying an extra tax for stupidity isn't. Here's a plan for getting the most for your money and avoiding an unnecessary penalty.

by Pat Freeman

Do you remember your very first job and your first paycheck? Or maybe you are still waiting for that exciting moment. When it happens, the big question may be, "What do I do with all this money?"

It may surprise you to know that there are only three things you can do with that money. You're probably thinking that's a strange thing to say when you consider all the things on your wish list. But here are the only three things you can do. You can give it away, save it or spend it. To keep your life in balance, you should do some of each of these three things.

Before you even cash that check, you need a plan. It should be a written cash flow plan (or budget). Put on paper everything you need to do with your money. Determine how much you will need for food, clothing and other necessities. Spending your money on paper before you get it is the best way to control your money. If you don't know where your money is going, you'll wonder where it went!

Give !

When making out your cash flow plan, be sure to put God first. He gave us everything, and we should honor Him with tithes (10 percent of our earnings) and offerings. Proverbs 3:9-10 states, "Honor the LORD with your possessions, and with the firstfruits of all your increase; so your barns will be filled with plenty…" We are also reminded in 2 Corinthians 9:7 that God loves a cheerful giver.

In addition, give to others as you are able. Remember, giving does not have to be money. Many people would appreciate a gift of your time or talent.

Giving helps us keep proper priorities in our lives. It is essential to good money management. Live the give way of life!

Save!

Proverbs 13:22 instructs us to save: "A good man leaves an inheritance to his children's children, but the wealth of the sinner is stored up for the righteous." Americans now have a negative savings rate. We want to buy things before we can afford them. We think we must have everything now! Learn to live within your income and delay gratification until you can afford whatever it is you think you must have now.

Most young people in the Western world want a nice car, but instead of buying a new car, buy a used one you can afford for cash (of course, having it checked out by a mechanic is a good idea). Put the money you would have paid for a car payment in a savings account where it will grow until you can afford to buy a better car and, in time, you may be able to pay cash for a really great car.

Learn the power of compound interest. It can be your best friend or your worst enemy. Working for you, your savings will grow rapidly. Working against you, you may very well be in debt for the rest of your life. The earlier you start saving, the more your money will grow.

Spend!

Now for the part most of us like best—spending. But a word of caution: stay out of debt! Once you turn 18, you will be offered credit cards by the dozen. They want to "help you" establish credit; have things now instead of waiting, buy now and pay later. Sounds great, doesn't it? Remember this, though. Credit cards exist for only one reason—to make money for the companies that sponsor them.

Many companies now make more money from their credit card interest than they do from their sales. If you don't pay the amount in full each month, you'll be charged interest. If you are late with a payment by even one day, they add on a late fee. Miss a payment; your interest rates soar. All these charges amount to paying what some have called "stupid tax."

If you decide to get a credit card—something that can be advantageous and convenient—make sure you use it wisely. Pay off your account in full on time every month so you aren't paying interest or late fees. Otherwise, when you get a credit offer in the mail, go to the shredder. Go directly to the shredder; do not pass go; do not pay $200 (or more) of "stupid tax."

Another way to avoid "stupid tax" is to use cash. Using your cash flow plan, divide your spending money into categories, such as food, rent, car expense, clothing and entertainment. Be sure to pay the necessities first. Put your cash for each category into a separate envelope and spend only that amount. When the cash is gone, you are through spending until your next paycheck. Remember to budget some to blow in any way you wish.

If you are already in debt from credit cards or student loans, pay them off as quickly as you can. As noted in Proverbs 22:7: "The rich rules over the poor, and the borrower is servant to the lender."

Dave Ramsey, money management professional and syndicated radio talk show host, advises young people to have a money monitor. This person could be a parent, pastor, supervisor or just a family friend. This person can help hold you accountable to your budget, and you should check with him (or her) before making large purchases.

Learning good money management skills while you are young will save you from trials later in life. Put God first, give and serve, save and spend wisely throughout your life, and you will be greatly blessed. VT