This Week in Your Wallet: Retail Therapy, Spending Diets and Questioning Your Tax Guy’s Street Cred
Think for a minute about the last time you indulged in a little retail therapy. I use that term purposefully – I’m talking about shopping not because you need something or even because you’ve been wanting something for quite some time, but for some other reason. We’ve known that there are many things that can drive us to spend: Having a bad day, a fight with your spouse, and so on. But how about your parents’ divorce?
That was a new one for me courtesy of Jeff Yeager – aka the ultimate cheapskate – who wrote about this financially surprising fact and others on jeanchatzky.com. As he explains of a paper chronicled in the Journal of Consumer Affairs, “researchers claim that early childhood experiences – especially parental divorce – are a major contributing factor to “compulsive buying behavior” in adulthood. The researchers contend that feelings of insecurity and low self-esteem common in many children of divorced couples manifest themselves in adult behaviors like compulsive buying, as a misdirected attempt to alleviate those carryover feelings from childhood.” Yikes.
It’s worth a read – there are plenty of other eyebrow-raisers in his piece. Thanks, Jeff!
Now for this week’s headlines…
Is your tax preparer, um, prepared?
With the official start date for tax filing season just around the corner (Jan. 31), it’s time to get all of the necessary paperwork together for your trusty tax preparer. But have you ever stopped to consider just how trusty he or she is? Well, the Consumerist did, and found that only three states in the entire country have explicit requirements for becoming an employed tax preparer. This makes your hairdresser, your barber and your cosmetologist more regulated than the folks you trust with your tax return.
Let’s look at it this way: Your uneven haircut will grow out, but an incorrectly prepared (and filed) tax return will lead to much bigger problems. Until the IRS takes another stab at regulating the system (they attempted and fell short earlier this year), DailyFinance offers some simple tips for vetting a tax preparer:
- No PTIN, no business. The IRS requires all tax preps to apply for a preparer tax identification number (PTIN). If your tax preparer dodges the question (or cops to not having one) take your papers elsewhere.
- Google it. Word-of-mouth reputations and recommendations are good filters, but for this particular position, take your research online. Google the preparers’ names and businesses; check out the sites they operate, and especially the ones they don’t, like the Better Business Bureau. Here, you’ll find if he or she has a history of complaints.
- Pass on the infomercial pitch. If your potential preparer is making a lot of big promises without looking at your documents – like providing you with “BIGGEST refund ever” –be wary. Big talkers might be willing to fudge the numbers to walk that talk. With that in mind, the IRS advises to avoid tax preparers who don’t charge a flat rate fee and opt for a percentage of the secured return instead. You don’t want them swapping numbers so that your bigger (and fraudulent) return gives them a bigger paycheck.
The post-holiday spending diet:
If you’ve been following me for a while then you know my approach to reducing debt is much like people’s approach to losing weight: Go on a diet! Which is why this recent article on CNNMoney about going on a post-holiday spending diet caught my eye. While some of the article’s advice differs from my own, it’s always good to get different angles.
For example, tracking your expenses is like counting your calories. But before you cut back on your spending, you first need to see where your money is going. While the article suggests taking a more laissez-faire approach by making a list, I say track every cent for a month if you can stomach it. If that’s too tedious or you’re just not going to do it, see if you can do it for a week. You’ll still come up with helpful insights about surprising ways you’re spending.
Reducing discretionary spending is also important for saving money and reducing debt. Two take-aways: First, look for monthly expenses you can trim rather than ones you have to tackle every time. For example, if you can shave $10 off your cable bill, that’s $120 for the year and you only had to do it once. Second, look for spending that doesn’t mean as much to you. You may cherish your once-a-week sushi, but perhaps you’re not as wedded to pricey brands of cosmetics or blue jeans. Try cheaper ones. And note: The bigger the item you can swap, the bigger the benefit to your bottom line, i.e. if you’re really not a car person, perhaps driving a new luxury car is something you can compromise on.
Have a great week,
Jean
