How do people afford bungalows?

amother

Lemon

Thu, May 28 2020, 10:46 am

I am surprised that people use tax refunds as a savings device.

In effect you are giving the government free use of your money for a year.

Why not adjust your deductibles and SAVE the amount yourself. You can at least earn interest.

Also if one is relying on "forced" savings in order to fund a luxury discretionary expense, perhaps it's not really something you can afford. I would imagine that those people who are relying on tax returns and viewing them as a "boon" are also not saving so they have six months of emergency expenses and funding long term savings for retirement or other expenses.

Blessing1

Thu, May 28 2020, 10:51 am

tweety1 wrote:

Somebody in aishes chayil told me " for this one is allowed to take out a gemach loan". I was flooded.

Don't be so quick to judge. Everyone can take out a loan for whatever they want, it's not free money.
Some people need to get away in the summer and if the only way to afford it is by taking out a loan, so be it.

amother

Jetblack

Thu, May 28 2020, 10:54 am

Blessing1 wrote:

Agree. The judgemental mentality here has got to stop.
And amother lemon everyone can figure out their finances and how to use their tax return money on their own.

amother

Seagreen

Thu, May 28 2020, 10:58 am

amother [ Lemon ] wrote:

Many ppl get a tax return and never pay any taxes.
If you don’t earn enough to pay taxes and have a bunch of kids it’s easy.

We get a tax return some years because we pay estimated taxes on the year before and depending on how things go some years we get money back. (Doesn’t mean we lost money - just properties depreciate or changing investments). We can’t pay less tho to not get the refund.
(We don’t go to bungalow tho)

amother

Emerald

Thu, May 28 2020, 10:59 am

Blessing1 wrote:

I live in a house with a beautiful yard and a pool and I look forward to summer all year long. Sitting outside enjoying the beautiful scenery is a huge part of my life and mental wellness. I can’t imagine how people live cooped up in a city house in the summer. I truly can not judge those who do whatever is needed to get away.

Blessing1

Thu, May 28 2020, 11:04 am

amother [ Lemon ] wrote:

I am surprised that people use tax returns as a savings device.

In effect you are giving the government free use of your money for a year.

Why not adjust your deductibles and SAVE the amount yourself. You can at least earn interest.

Also if one is relying on "forced" savings in order to fund a luxury discretionary expense, perhaps it's not really something you can afford. I would imagine that those people who are relying on tax returns and viewing them as a "boon" are also not saving so they have six months of emergency expenses and funding long term savings for retirement or other expenses.

What does using tax return money for extra's have to do with not having emergency money and retirement savings??? Why are you assuming that "those people" are not saving??
We always use our tax return for extra's. We have money saved up. The 2 have nothing to do with one another. It's very normal to use your tax return money for extra's you wouldn't be able to otherwise afford. And for some people, going to the country is a must and not an extra.

amother

Lemon

Thu, May 28 2020, 11:05 am

amother [ Seagreen ] wrote:

Isn't that some form of tax credit for dependents? It's not what I would call a tax refund which is when people don't claim enough on their withholding and so get a return.

I would also assume that someone who is getting a tax credit because they don't have sufficient income to pay taxes is probably not in the best financial shape.

Obviously people set their own financial priorities, but I personally can't imagine spending on discretionary stuff in lieu of having saved enough so that I have financial security for an emergency or for long term spending. The Covid19 illustrates the difference between going hungry and not having money for rent/mortgage because one doesn't have income for a month or so and at least having enough emergency funds to cover one's essentials if one's income is reduced or disappears.

amother

Lemon

Thu, May 28 2020, 11:09 am

Blessing1 wrote:

Because allowing the government to use one's money for a year is a poor use of money and generally is used by people who are unsophisticated as they don't view their income as one source but somehow think the tax return is NOT their money and somehow can be treated as something else.

If you need the government to "force" you to save money artificially it is unlikely - although not impossible - that you are saving on your own. Why would you need the government to hide your money from you if you had a savings/investment plan on your own.

ruchelbuckle

Thu, May 28 2020, 11:11 am

To answer the OP- some people save up for it. Or however they afford anything else. I have a friend who budgets it in, just like groceries. Her specific circumstances make it “mandatory” for her (whatever that means)—- so she budgets for it, just like people budget for a car lease, tuition, a new sheitel, anything else.... People have all sorts of luxuries that I don’t understand, and I’m sure I have all sorts of luxuries that other people don’t understand.

groovy1224

Thu, May 28 2020, 11:14 am

amother [ Lemon ] wrote:

I never really understand this advice.

Most people are not able to forsee their tax liability, unless they have a very thorough knowledge of their financial situation and the relevant tax laws that apply to them. There are so many factors. So they would rather be conservative and withhold more, and get a large refund. The amount of interest you would be able to earn over the course of the year is so minimal it barely matters. If you get a 3K refund in April, how much interest would you have earned on that if you have not withheld that 3K? $50?

amother [ Lemon ] wrote:

Also if one is relying on "forced" savings in order to fund a luxury discretionary expense, perhaps it's not really something you can afford. I would imagine that those people who are relying on tax returns and viewing them as a "boon" are also not saving so they have six months of emergency expenses and funding long term savings for retirement or other expenses.

I don't necessarily agree, but even if you are correct, so what? OP asked how people afford bungalows, and apparently withholding extra taxes to receive a large refund is one way people save without feeling it too much. If it works it works.

Blessing1

Thu, May 28 2020, 11:27 am

amother [ Lemon ] wrote:

Because allowing the government to use one's money for a year is a poor use of money and generally is used by people who are unsophisticated as they don't view their income as one source Burt somehow think the tax return is NOT their money and somehow can be treated as something else.

If you need the government to "force" you to save money artificially it is unlikely - although not impossible - that you are saving on your own. Why would you need the government to hide your money from you if you had a savings/investment plan on your own.

Everyone knows that tax return is their money. We don't "allow" the government to use it for a year, they take it themselves whether we like it or not. But I look at it as a bonus because we don't depend on our tax return money for day to day living.
We may choose to invest our money however we like.

amother

Lemon

Thu, May 28 2020, 11:31 am

groovy1224 wrote:

Getting a tax refund is not generally because someone has complicated forms of income and deduction. Most people don't even file anything but a simple tax return especially with the new tax laws.

Most people deliberately have more withholding taken out of their salary than is necessary so that they have a tax refund which they can then use to splurge on.

It's also a mindset in terms of thinking that a tax refund is somehow a gift and so can be splurged. If one were deliberately saving money each paycheck, chances are one would look at the money as different and not a "gift". If one is deliberately saving money each paycheck to fund a large expense that's great. But my experience is that people who use tax refunds to splurge on don't view the money as an integral part of their income and expenses.

In general those people with complicated tax returns are the ones least likely to need a tax refund in order to fund a bungalow Very Happy

Blessing1

Thu, May 28 2020, 11:34 am

amother [ Lemon ] wrote:

How do you know what most people do??
Our tax returns are sooo not complicated and we use the money for extra's. It's not an integral part of the income, it's taxes.
Even if you deliberately save money from each paycheck, you're still paying the same amount in taxes.

amother

Lemon

Thu, May 28 2020, 12:25 pm

Blessing1 wrote:

I know what most people do reading articles on personal finance and the finance writers know based on their researching tax returns. It's pretty standard basic financial advice NOT to under withhold as a way of savings.

It's not a question of tax savings - it's an issue of how one approaches money and one's personal finances.

You are illustrating this kind of naivete by thinking your tax refund is somehow not your regular income but just "taxes". Your net income is whatever your income is less actual taxes owed. It is not somehow different income if you receive it in a lump sum as a refund. It just seems like somehow you are getting a bonus amount when in fact all it means is that you overpaid and gave the government free use of your money for a year Very Happy

Why do you need a lump payment one time a year to allocate for extras - it's all just your annual net income and when you budget it makes more sense to determine what your actual net income is instead of thinking that somehow you have "free" money once a year.

DVOM

Thu, May 28 2020, 12:27 pm

For us it's free. We go to my parents (large!) summer home; four kids in day camp is included in the cost of renting the bungalow, and my parents don't have day camp aged kids, so that takes care of day camp. We try to buy our own food, but my parents end up paying for lots of it.

This year is very up in the air though. We don't know if it's going to open, if my parents are going to go, if they go if they will feel safe with us all living together in one house... so we're thinking about alternate plans and hoping for the best!

Blessing1

Thu, May 28 2020, 12:37 pm

amother [ Lemon ] wrote:

Yes, I know all this. Yet I still view our tax return as a bonus. Not free money, but a bonus. It's part of our net income but can't be used or budgeted into our regular living expenses because the money is only available when we receive the tax return. So it's a once a year bonus.
We don't "pay" the government, the money gets automatically deducted. We don't choose how much taxes to pay.

amother

Lemon

Thu, May 28 2020, 12:43 pm

Blessing1 wrote:

I am not sure if you understand.

When you fill out the W-4 form or the equivalent for 1099 income you can choose how much you want to be deducted. Therefore you can have the use of income that is "refunded" throughout the year.

It's your money - always was your money and it's not a bonus from the government.

The money is automatically deducted if you are salaried but the amount is within control your control. If you are getting a significant refund, then you need to adjust your withholding so that you are NOT overpaying taxes for the year.

Having the government over-withhold is not any kind of tax planning or savvy tax deduction - it is the antithesis of good economic planning because you are giving someone your money for a year.