Getting a Tax Refund- is it always a good thing?

The IRS reported today that with nearly half of this year's taxes filed, the average refund is up nearly $125 to $2,458.

In one way this is good news- extra money in the pocket is always a good thing but if you really think about it, it is a tax refund. That means we over-paid our taxes and the government made interest on our money. IRS reports they have refunded $128.7 BILLION this year so far- that's a lot of interest for someone else to be making on your money.

If you have good self-control, opt to pay less on your salary (there's a tax form you can file with HR) and invest the excess money you save in a high interest account (or invest it in your RSP/401K if you have excess contribution room to lower your taxes). Even if you have to pay more taxes than was taken off your pay cheque, at the very least, you get to keep some of the interest you have earned.

Lessons I have Learned from Others

My life story will jump around quite a bit in this blog. Approximately 4 years ago I started my own business helping other businesses:

This has had several impacts on how I look at money:

1. I like paying taxes. Yes, I like paying taxes. I don't like paying too much tax but paying tax means that I am making money.
2. A good business understands revenue recognition- every expenses should be tied to a corresponding revenue source. An outgoing expense should match incoming revenue. If it does not, the money should not be spent. It sounds simple but if you ever read the business news how many times have you heard about a business that started "empire building" and met financial set-backs (Time Warner-AOL comes to mind)? Or, closer to home, I always worry about people who buy investment property and say "at the very worse, I can write off my losses and pay less tax?" It sounds like a strange proposition that someone would invest money with the goal of losing it.
3. The most successful business people do not have access to different products or networks than middle class citizens. They just think in a manner middle class citizens are not conditioned to.

I'll expand on this last point in my next blog.