Too many fingers in your pockets these days? Who couldn't use more money! Yet I find too many are still willing to fork over money to the government needlessly, by way of overpaid tax withholding or quarterly tax instalment payments.
The final quarterly tax instalment of the year is due on December 15. (Farmers and fishers are required to make one advance payment on taxes owing for 2010, on December 31). Now is a great time to make sure you don't overpay, like so many other people do. They withdraw money from their savings accounts-often at the wrong time in a market cycle--just to be sure they get a refund next spring! In these market conditions that just makes no sense to me.
I ran across an interesting quote by Author Shauna Carter, who makes a great point, succinctly describing why it is so important for you to use the time value of money to your advantage in all financial activities:
"Why would any rational person defer receiving payment into the future when he or she could have the same amount of money now? For most of us, taking the money in the present is just plain instinctive. So at the most basic level, the time value of money demonstrates that, all things being equal, it is better to have money now rather than later. . . time literally is money - the value of the money you have now is not the same as it will be in the future and vice versa."
So why do intelligent, hard working people willingly fork over 30%, 40%, and even 50% of their gross receipts to the tax department every year with little complaint or fanfare, other than perhaps some frustration and resignation at the whole process?
Why are they so willing to overpay those tax withholdings or quarterly instalment payments, just to get a refund at the end of the year, with no interest for the use of their money in the meantime?
That's just not smart these days, when you could instead be investing in a Tax Free Savings Account, or an RRSP, which could help you win back more of those tax withholdings.
Why not take maximum advantage of the time value of money with astute tax and investment planning?
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