Sprint and T-Mobile Agree to Combine in $26.5 Billion Deal

T-Mobile and Sprint reached a $26.5 billion merger agreement Sunday that would reduce the U.S. wireless industry to three major players — that is, if the Trump administration’s antitrust regulators let the deal go through.

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Educational 'play space' among new businesses

Editor's note: This is the first of what the Pocono Record hopes will be a monthly series on new businesses opening each month in the Poconos.STROUDSBURG — When children walk through the door of the Bloom Waldessori Play Space, they get to learn about the world around them by playing with the world around them.Catering to children between infancy and elementary-school ages, Bloom is scheduled to open Tuesday. It shares a location with the Yoga House in the [...]

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Money Doesn’t Always Answer to Math

Recently, I got sucked into a random Facebook thread that blew my mind — and not in a good way. The thread, which was started by a journalist in a business-related group I belong to, implored people to share how they planned to spend their tax refund this year. This shouldn’t have been controversial, but it escalated quickly once a few financial planners chimed in.

One in particular shamed the female journalist for even bringing up a tax refund. Financially educated people should never “give an interest-free loan to the government,” he said, adding that people in that particular group should “know better.”

I laughed out loud because, first off, the journalist wasn’t asking for advice on tax refunds; she was asking for personal stories to share in an article she was writing. But, she was a woman, and the amount of mansplaining done by male financial advisors I deal with seems nearly endless. Any time certain financial advisor types see an opportunity to interject with their “my way or the highway” advice, they often take it, even if they have to go off the rails (and off topic) to make their point.

The second reason this thread made me laugh is that the advisor in question recommended that people “adjust their W-4s at work.” This was funny to me since, well, the Facebook group this thread was posted in is mostly made up of entrepreneurs who are self-employed and paying quarterly estimated taxes. Many, if not most, haven’t filled out a W-4 in a long, long time.

When Getting a Tax Refund Makes Sense

But, this post isn’t about mansplaining or financial advisors; it’s about all those times in our lives where the math doesn’t really matter. Getting a tax refund is one of those instances in my eyes. There are dozens of reasons people choose to overpay their taxes to get a refund, many of which I understand.

Let’s say you actually like getting a tax refund and use it for something special every year. Maybe it’s your vacation fund or the cash you use to fix up your yard every spring. Because taxes are withheld from your paycheck or paid quarterly in most cases, a lot of people see their tax situation as a form of forced savings. If they pay in a little extra, they get some back when they file. Is that really the end of the world?

The financial planner that rattled on with their advice seemed to think so. He said you should take your extra money and put it in a high interest savings account instead — even though rates are only around 1% APY right now. According to the IRS, the average tax refund for the 2017 tax year was $2,763, or enough to earn you close to $28 in interest for the year. Awesome. 

For some people, forced savings isn’t the issue; they just hate owing money. I fall into that camp, although I tend to owe a little bit every year.

When you’re not a W-4 employee and you have a highly fluctuating income, it can be difficult to even know what to pay, let alone get close to even. For the 2017 tax year, I owed $4,500 in federal taxes and got $5,500 back from the state. I consider that a wild success.

What If Math Isn’t Always the Answer?

Math is amazing, and it can be used to guide many of the most important financial decisions we’ll face. Still, I wish more people would realize that math isn’t the end-all-be-all. There are plenty of instances where the mathematically advantageous approach doesn’t win out with people because some other factor is more important.

For example, let’s consider the endless argument over whether or not you should prepay your mortgage. While a ton of financial professionals would advise against prepaying your mortgage if your interest rate is low and you qualify to save on taxes via the mortgage interest deduction, there are just as many that say prepaying your mortgage is smart if all of your other financial ducks are in a row.

Of course, plenty of consumers don’t care what financial experts say and prepay their mortgage anyway. Their reasons span from hating debt to earning a guaranteed rate of return based on their current interest rate. Prepaying your mortgage may not be the optimal financial strategy, but that hardly means it’s a bad one. It’s just another decision we have to make as we navigate our financial lives and decide what’s right for us.

Another example is the debt snowball approach to debt repayment. While it makes more mathematical sense to pay down your highest-interest balance first, throwing all your extra money toward your smallest balance can help you build the momentum needed to follow through on what can be a long and difficult process.

There are plenty of other decisions we need to make to get ahead financially and forge a fruitful retirement, and many of them aren’t so black and white, either. For example, not all consumers share the same appetite for risk when it comes to investing. For that reason, some choose aggressive portfolios while others play it safe regardless of what the math purportedly says.

And what about leverage? If given the chance, some people will borrow money for anything from cars to furniture if their interest rate is low enough. But, other people avoid debt like the plague, even if that means forgoing a 0% same-as-cash offer. Those who hate debt don’t care as much about their “lost returns” in the stock market or elsewhere as they do about retaining their debt-free status, and that’s perfectly okay.

Then, there’s budgeting and spending. Some folks prefer the zero-sum budgeting method where they track almost every dollar they spend, but not every personality jives with that approach. That’s why others choose something more flexible like the 50/30/20 budget, which allows them to spend whatever they want as long as they stay within their spending “buckets.”

• Related: Does Budgeting Seem too Complex? Five Simple Alternative Strategies

Then, there are people who set specific financial goals and don’t bother budgeting as long as they are saving as much as they want for the future. If that works for them and they’re saving as much as they need, then shouldn’t that be okay?

I think it should, provided you’re making mostly good decisions regarding your future and financial health. Prepaying your mortgage is a downright awful idea if you aren’t saving money for retirement as a result, for example. You can’t use your house to pay for retirement if you still need to live in it.

And, avoiding all risks associated with investing can be risky in itself since, as we mentioned, interest earned in high interest savings accounts and other safe investments is paltry right now. If you settle for incredibly low returns and forsake the stock market altogether, the money you save will be worth less and less over time thanks to inflation.

How do you know whether you’re on the right track or not? Meeting with a fee-only financial planner can be truly helpful provided you have the strength to stick to your guns when it comes to controversial financial decisions such as avoiding debt and prepaying your home loan. While they may not like all your decisions, they can show you the pros and cons and help you create a comprehensive financial plan that will meet your needs in the end.

You can also sign up for a robo-advisor like Personal Capital or Betterment. These services offer tools that can help you create the ideal retirement and track your net worth, and they won’t judge you over whether or not you prepay your mortgage, either.

The Bottom Line

If you’re someone who approaches money differently for any reason, don’t let financial professionals or anyone else shame you into their way of thinking. Our financial lives aren’t always as cut and dry as people wish they were, which is why some strategies work better for some people than others.

Ultimately, you have to do what’s best for you — and what keeps you sane. If you hate debt and want to avoid it at all costs, there’s no reason you should change course because somebody says you should. If you want to prepay your mortgage and get it over with, do it. And, if you want to overpay your taxes to get a refund each spring, don’t let anyone stop you.

Math can be used to guide your decisions, but it’s not the only answer. If you feel so strongly about your beliefs that you’re willing to buck the system, it’s okay to do things your own way. As long as you have a long-term financial plan that will help you cover your retirement needs in the end, that’s all that matters.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

Related Stories:

• In What Order Should I Pay Off My Debts?
• Eight Money Mistakes the Middle Class Keeps Making
• Saving Enough for Retirement When Money Is Tight
• Eight Amazing Things that Happen When You Finally Pay Down Debt

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