Patterns in behavioral finance are not always universal. You may relate to some but not all of the following taxpayer traits on the healthy or anxiety-prone side or you may experience challenges and breakthroughs on both sides. I also acknowledge that every year is different financially and emotionally. My purpose is sharing these characteristics is not for you to judge yourself (or others) but to guide you in expanding your self-awareness and money consciousness and, of course, to offer support, choices and tools for change.
Healthy Taxpayers Tend To :
- Maintain a tax savings account
- Have a sense of control, calm and peace of mind while preparing taxes
- Use an empowering, systematic approach to track personal and business expenses throughout the year
- Experience a positive, easy and affirming relationship with an accountant based on trust and respect
- Take time to reflect on what went well with money this year and what can be improved upon
- Make necessary shifts and changes to set themselves up for success next tax season
- Receive tax refunds, break even or owe small manageable amounts
People At Risk for Developing Taxpayer Anxiety Disorder:
- Suffer from negative behavior related to tax matters: overspending, overeating, overworking, distraction, deprivation, isolation, dishonesty, imbalance, poor physical health, anxiety, loss of sleep, restlessness, irritability or loss of appetite during tax season
- Owe back taxes
- Remain disempowered and uneducated about personal and business tax strategies, deductions and liabilities, a.k.a. “just sign the papers”
- Use credit cards, overdraft accounts or lines of credit to pay taxes
- Avoid tax-related responsibilities: paperwork, deadlines, mail or phone calls
- Experience behavioral paralysis and are unable to address tax problems in a timely manner
- Have a frightening, threatening or disconnected relationship with an accountant
- Do the same thing year after year expecting different results
- Unexpectedly owe taxes
Mid-February is the earliest I’ve ever filed taxes. I do not enjoy that “doom and gloom” feeling of having a big, potentially difficult project to tackle like tax prep. In order to avoid uncomfortable feelings, I tend to force myself into action, which can have negative consequences too, namely over-doing. I was inspired by one of my clients who filed in January this year and had her tax refund within a week, wow! When, I finally sat down to work on my taxes, I had cleared my calendar of work and family obligations for the day. I set the mood by making myself a cup of chai and listening to Deva Premal’s Moola Mantra followed by the soundtrack from a Juicy Ladies women’s circle I recently attended.
I spent some time with the features my bank, USAA, offers online and then was able to quickly sort my 2020 business income, expenses and savings data in a spreadsheet. I used to read printed statements from multiple institutions line by line and do all of that by hand! I uploaded my personal and business spending, saving and earning annual reports from my tracking software, MoneyMinder® Online. Lastly, I scanned 38 documents between my husband and I and wrote my CPA an email highlighting a few things from 2019.
It wasn’t always that straight-forward. When I first started working with my accountant seven years ago, I showed up with a shoebox of receipts, scribbles of notes, a very limited financial vocabulary and even lower self-esteem about money. Tax prep used to be a multi-day stress fest and my accountant had to do numeric and mental gymnastics to make sense of my situation. Being overwhelmed and disgruntled about money used to impinge on my relationships. I lost a lot of sleep and overate and found many other ways to avoid feeling the feelings. I was a mess and so was my money.
At the bottom, I finally identified the unmanageability, got help, and began a path of rigorous honesty and personal development. With support, hard work and time, I recovered from debilitating codependence, a complicated family history and financial enmeshment (enabling and dependence). Since then, I’ve grown up and developed as a financially literate, self-supporting, confident and savvy woman. Plus technology has changed. My accountant uses Tax Caddy software now and it’s easy and *borderline* fun to use. I still needed to take lots of audible deep breaths and breaks and I finished my taxes in a miraculous half a day. What a relief! I celebrated with a mid-week hike at Windy Hill Nature Preserve and over the weekend enjoyed fun and fancy dinner plans with old friends.
If you’re looking to get started in (re)creating a healthy and sustainable relationship with money, for the next seven days, write down everything that happens to your finances by hand or in an app or spreadsheet. Benefits: increased awareness, sense of presence and connection to reality as well as identifying and stopping leaks in spending.
Take it to the next level and choose a personal finance tracking system that works for you. My current favorites include: MoneyMinder® Online, YNAB, Quickbooks, Mint, and Tiller HQ. Realistically expect to spend at least ten hours on set up, learning, and practicing before you reach a less intense maintenance mode with the software.
Focusing on your money is hard work and I recommend doubling up on self-care. Journal or share with a financial confidant what’s going well and what you are struggling with in your relationship with money. Consider exploring spending, saving, earning and as well as the emotional side of money. List ten ways you like to take care of yourself for zero or little money.
As an antidote to triggers or an addition to your existing daily practices, take a deep breath and read:
“I am honest, open-minded and willing.”
“I know where my money is going.”
“Uncomfortable feelings are not bad, they are a sign of change.”