Mama’s School of Money Management

Published in The Fauquier Times-Democrat Weekend on June 17, 2011

I’m not the world’s best money manager.

Last week we received a letter from the IRS informing us that there were a couple of things we seemed to have omitted from our tax returns in 2009. Receiving such a letter and realizing that you have been under this kind of scrutiny from the friendly folks at the IRS has the same effect as discovering that you and your family have been sharing your kitchen with rats. Rats can ferret out stashes of food. They are ridiculously smart, and nearly impossible to get rid of. Hmm. Rat infestation or an IRS investigation – now there’s a tough choice.


Apparently, back on our 2009 taxes, I had failed to report $ 85 of income from my sole day of substitute teaching at Kettle Run High School. You know, when money is pouring in everywhere: the checks for this column and that one direct deposit for substituting in Algebra II, it’s easy to lose track.


Why I had not revealed this extra bang in our buck, I cannot fathom. Was it because I hadn’t received a W-2 form from Fauquier County? Or perhaps I had received it and misplaced it. Surely I must have been notified, because even the IRS knew.


The oversight of $ 85 would not have been bad in itself, but there was the additional matter of not having included the previous year’s state tax refund as part of our income. At least, on that one, I can try to claim innocence, as it was an oversight on our tax preparer’s part.


Despite juggling other things when this letter arrived, I definitely dropped those balls to attend to the IRS’s bone. The tax preparer graciously walked me through the forms and even compensated us for the $19 of interest that accrued on the $400 we owed.


My husband was completely philosophical about the $ 400 we had to send in to the IRS for the taxes we owed: “We’re not paying anything extra,” he says. “If that’s what we owed, then that’s what we owe.”


I wish I could have shared his stoic outlook a couple of years ago when I received our first piece of mail for 2009: an electric bill that exceeded eleven hundred dollars. It was $1,171.28 to be exact. That’s right. And I’m not even going to say how shocking it was, because that pun is too low even for me.


Apparently, the meter, strapped to the side of our house, became infected by our athletic apathy. Why should it be the only one constantly running and spinning around here? It decided it was tired of running this marathon and chose to slow down to our leisurely saunter, much like the gym student who realizes that no one is specifically monitoring him.


The meter’s slower pace of life had the very pleasant side effect of producing low power bills for a few months – until someone at the power company noticed its anemic performance. I might have realized something was wrong too, but I had attributed the low power bills to a clever accounting practice of mine that allows me a bit of mathematical laziness.


I’m going to share this trick with you here at no charge. That way, if it gets you into any trouble, you can’t demand a refund. So here it is: When I’m paying our bills with some inconvenient, jagged number in our checking account - let’s say it’s $446.17 and I get a bill for some other, (hopefully smaller) amount – let’s say $67.59 for water from The Town of Warrenton, I like to pay it out so that it leaves me a smooth, rounded number in our account. (Naturally, I only do this for recurring bills so the credit rolls over to the next month’s bill.)


So here I wouldn’t pay just the $67.59. I might pay $76.17 so that it leaves me with $370.00 to work with in the account. If I’m feeling overzealous, I might even pay $146.17 so I’m left with exactly $300, and then I pay the other bills out in whole dollar amounts too so that they also leave credits on the accounts.


This works well until I hit a one-time sort of bill, like the IRS demanding some money. Even I know not to leave any excess funds there, so I pay it exactly, and that might leave me with another jagged number. But we can smooth it out with the next bill.


I realize that I gain nothing by this method, and if I were smart, the extra dollars would always and only be applied to bills in which the excess could help pay down the principal owed, such as on a mortgage. But then again, as I told you, I’m no financial wizard. I’m just curious, though, where the IRS is putting its money so that it could grow $400 by almost 5% in this economy in one year’s time.