Tax Refunds Are Down – That’s a Good Thing

Tyler Linsten Personal Finance, Taxes


I am strangely enraged by people who defend this weird desire to have a big tax refund. They tend to say, “I like knowing there’s something coming my way in April.” This is largely anecdotal, but I hear it all the damn time.

Earth, to you Big Refund People: Your argument is terribly flawed and this is a supreme example of what’s wrong with personal finance in America.

Disclaimer: None of this massive rant applies to lower-income folks who may have tax complications due to the Earned Income Tax Credit or other various matters related to income uncertainty. They have it hard enough and don’t need me sending bad karma their way. No, this is for the six-figure earners I know. Yeah, you guys. 

I was compelled to make this post after seeing this CNN article, knowing that most people will see it in a negative light:

This is a good development

As reported by CNN, the average tax refund last year was $2700. But we also know that 41% of Americans cannot afford an unexpected $400 expense.

Translation: Refunds are huge, yet people are still broke.

People think they’re being responsible by setting themselves up for a large tax refund. In reality, this is a tax-free loan to the government and has basically no chance of being utilized in a smart way. Full stop. If this is your saving strategy, I am here to tell you it is not a good one. It is a band-aid intended to cover up the bullet wound that is your financial discipline.

If you skip lunch and then eat two dinners, you won’t be losing weight. People are convincing themselves that this is an effective financial diet.

Some may think that they’re performing some kind of a preventative financial measure because they know they aren’t good savers, and they would immediately spend the extra money every paycheck if they withheld a more appropriate (smaller) amount for taxes. HELLO? If you don’t think you can handle seeing a few extra dollars arrive with every paycheck, do you really think you’ll wisely allocate a one-time lump sum of thousands of dollars? I get the logic, I really do. But it’s wrong. People, stop doing this.

There’s also a big difference between making sure enough is withheld for taxes (and generating a small refund, which is fine) and the aforementioned tax refund-as-a-savings-account delusion. A small refund is OK – it’s a margin of safety against paying a penalty for underpayment. You never want to owe money at tax time. But setting yourself up for an obvious, huge refund is just silly. If you don’t have the discipline to save money weekly or bi-weekly, you certainly don’t have the discipline to save your mega refund.

Good personal finance rule: Receive interest, don’t pay it

With interest rates now being much closer to being “normal,” it’s easy to once again make the argument about passing up interest on the amount of these mega tax refunds.

It’s dead-simple to earn an FDIC-insured 2.20% APY in a savings account right now. Given that $2,700 refund, people are technically leaving about $60 on the table over the course of the year. It’s nothing major, and not even close to being the real argument here, but it’s not nothing. Call it a nice dinner out to celebrate making a wise tax decision. To me, that’s worth it.

In summary, Uncle Sam will always get the exact amount he’s owed. No matter what. There is no free lunch. Should people decide to convert this process into a twisted game of delayed gratification, then, well, that’s on them. But don’t say I didn’t try to change their mind.

Rant: Over.

About That “Consider Firing Your Male Broker” Op-Ed

Tyler Linsten Investing, Personal Finance

Hopefully you’ve also fired your Mail Broker by now. Stamp prices are at record levels this week and he’s just sitting around doing nothing about it! This aggression cannot stand.

In all seriousness, I’m actually referring to the controversial New York Times opinion piece penned by a financial advisor in New Orleans this month. To sum it up, she makes the case to fire your “male broker.” Wading into this topic is fraught with peril, but I’ll do it anyway because it’s my blog.

Don’t mistake my maleness for generating my reaction. It’s my status as a fellow fiduciary fee-only advisor (and also a fellow CFA Charterholder!) that draws out my serious criticism here.

Ms. DuQuesnay says she didn’t write the headline, and I believe her. But her argument is weakly-supported, largely anecdotal, and her conclusion is sexist and promotes reverse discrimination. Worse, she takes focus away from the real issue in financial advice and instead hones in on a topic that was sure to generate clicks and comments. After all, she works for a firm whose business model is based on generating business through rising traffic on its network of financial blogs. (Its CEO heads a firm espousing long-term, patient investing, yet he appears daily on a CNBC show dedicated to short-term trading and speculation. Go figure)

Promoting one sex or the other as superior, in any industry, is reverse discrimination, and is taking precisely the polar opposite stance from that of a progressive approach toward a much-needed equal playing field. The bigger fight here is broker versus fiduciary, not woman versus man. We all lose in the latter scenario. I get the sense that Ms. duQuesnay knows better but was given a national megaphone and wanted to make sure her voice reverberated.

I’ll end it with this level-headed take, published in the NYT a few days later:

Q4 Client Letter

Tyler Linsten Client Letters, Investing

2018 wasn’t an awesome year for investors. Let’s chat about it.

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Three Obscure Personal Finance Hacks

Tyler Linsten Personal Finance

Not to be confused with Three Personal Finance Plaques.

I admit to doing weird stuff to save money sometimes. You (and especially my wife) might say I have a particularly George Costanzan approach.

Season 3, Episode 2, “The Truth”

Elaine (speaking to George): You’re extremely…careful with money.

George: What?!

Elaine: Forget it.

George: I’m cheap? You think I’m cheap? How could you say this to me, I can’t believe it!

Anyway, the truth about this post is that I only have one obscure “personal finance hack.” And it’s not really even a hack, so much as it’s literally about a kitchen utensil. I only told you it was three items because that’s called clickbait. Again, this is a post about a single utensil. Not even three different utensils. You’ll see why.

If you’re still with me, maybe you’re willing to come a little further.

Behold, the jar scraper:

The jar scraper is the index fund of the kitchen. It’s cheap, prevents wasted money, and is only exciting to the truest cheapskates. Its yearly return on investment when compared to financial products is bonkers.

Maybe this is something everyone has in the kitchen, but we were gifted a utensil set recently and this was my first exposure to its brilliance. I realize I might be really late to the jar scraper game.

I had my doubts about the jar scraper. It sat dormant for a long time, awkwardly taking up real estate with other utensils in our starting lineup of spatulas, wooden spoons and whisk. So why did I keep it on the roster for so long if it wasn’t getting any playing time?? I only have the kitchen gods to thank. Praise be.

It was only until an intense moment of peanut butter need that I gave it a shot. My jar of peanut butter seemed woefully empty – I forgot to buy more and saddled myself with nothing but an “empty jar.” My PB&J was surely going to be reduced to a “J” sandwich. But then I saw it in my moment of desperation. It was time to get this jar scraper in the game.

Now, this jar of PB was beyond merely being what I previously knew as empty. It had already been through a thorough scraping from a regular butter knife. How it came to still be in the cabinet was beyond me. Traditionally, this was game over. But this is the magic of the jar scraper. This SOB can scrounge up at least another full serving of peanut butter from seemingly nothing but brown residue.

See that little notch?

The notch is the most important part of the jar scraper. It lets you get underneath the contoured top of any bottle or jar. There’s at least one spoonful of PB under that little shelf and the jar scraper is your key to unlocking it. I promise you, the jar scraper will get it for you and it won’t even complain about it. It works selflessly for you at any time.

Not convinced? Let’s look at the numbers:

Let’s say you are the consumer of $5 of “jarred products” per week. Maybe it’s peanut butter. Maybe it’s jelly. Maybe it’s Nutella. Whatever it is, you like it and you’re wasting a bunch of it. Until now.

My extensive research says there’s roughly 10% of product left for your jar scraper to redeem after an initial round of scraping with a knife. This means you’re wasting 50 cents per week! 50 cents multiplied by 52 weeks gives us $26 per year in JSR, or Jar Scraper Revenue. The Le Creuset jar scraper costs a mere $14, even if you buy it directly from them. That’s an 85% return on investment in the first year alone. Just imagine the compounding effects of decades of jar scraping. Maybe you’ll spend it to build a little shrine for your jar scraper, but the choice is yours.

Don’t just take my word for it. See your new best friend in action: