Don't Mess With Taxes

Since Homer is now saving Springfield and the rest of the world on America's movie screens, it seems a perfect time to look to the Simpson pater familias for some financial advice.

Don't worry. We know Homer.

In keeping with his lamentable but lovable tendency to screw things up, our list is actually a collection of bad money moves. Or, as we like to call them, dough d'ohs you don't want to do.

So here d'ohs, uh, goes:

Living beyond your means: Too many folks spend everything they make and then some. That obviously means you'll end up in debt, making it impossible to handle financial emergencies and save for the future. 

But instead of just slapping your forehead is dismay a la Homer, Karen Murrell and Lois Vitt, co-authors of "You and Your Money: A No-Stress Guide to Becoming Financially Fit," say develop a spending plan to help you see where your money is going and identify strategies to make the most of what cash you've got.

Damaging your credit rating: If you're living beyond your means, you're probably relying on credit cards and charge accounts. Miss any of those payments and you're guaranteed to mess up your credit rating, which will mess up the rest of your life.

Damage done to credit ratings is not irreparable, but it's not easy either.

First, quit charging. Next, pay off what you already owe. If you just can't make the payments on your current agreements, call the credit card companies directly and see if you can adjust payment schedules or terms.

If all else fails, go to a reputable credit counseling agency -- one that provides financial education in addition to helping you pay your debts -- for help.

Not having an emergency fund: Without some cash on hand for the things life throws in your path, you'll fall back on your credit cards and dig yourself into that debt we've already talked about.

When you pay your bills each month, put a few bucks into an account for emergencies. That way when the refrigerator goes out or you have to get a new tire because the city just wouldn't fix that pothole, you'll be able to pay for it without worrying.

Jim at Blueprint for Financial Prosperity recently presented a Devil's Advocate post on why you don't need such savings, but he made it clear right up front that he was only taking the counter-intuitive position to make a financial point. So take both our words for it and start putting aside a little each month for those unexpected expenses.

Under- or overinsuring yourself and your property: Insurance is one of those necessary evils. Sure, it's frustrating to make those payments for something you don't ever want to have to use.

But if you, as they say in the industry, "go naked" (are you replaying in your head that scene of au naturel Bart right now?), you could end up paying a lot more if the worst does happen.

At the other end of the spectrum is wasting your money by paying for insurance coverage you don't need at all or for a policy that's much too big. Financial Web pretty much sums up the dilemma facing most of us: "It's probably safe to assume that most people do not understand how insurance works, how companies assign risk and set premium rates, or even know what to look for in a policy."

The solution? Do your homework. FW's insurance section has lots of articles to help you determine your coverage needs and options; so does Bankrate. Then find an insurance agent that you trust and who offers several products from which you can choose.

And be sure to evaluate your insurance needs regularly and adjust them as your personal circumstances change.

Not saving for retirement: If you do this, you'll end up eating the proverbial cat food (or Bart's shorts) in your golden years. Luckily, you've got several was to avoid financial regret here.

You can save on your own with an IRA. For younger savers, a Roth account, where you'll eventually be able to take the money and earnings out tax-free, is the best move.

Some folks still opt for traditional IRAs because they offer immediate tax deductions, but these folks will owe the IRS when they take retirement distributions.

Either way, though, you need to start saving for retirement now.

If your employer offers a 401(k) or similar plan, be sure to sign up. In these cases, your boss likely matches a portion of your contributions. Plus, note Murrell and Vitt, saving is easier with a workplace plan because your contributions are automatically deducted from your paycheck.

Thinking about taxes only in April: OK, you don't have to be a certified or certifiable tax geek, but if you only worry about your tax bill once a year, you're probably paying Uncle Sam more than you should.

By the time the annual filing deadline rolls around, it's way too late in most cases to make any moves that could cut your tax bill. Rather, consider your tax situation throughout the year.

When you get married or divorced or have a kid, you need to reassess your withholding.

When your company's benefits enrollment time arrives, think about how a tax-saving medical savings plan could pay off.

Did you sell a stock when the market hit 14,000 and make a nice profit? Then start thinking about your capital gains taxes now. Consider selling that bad asset that somehow has still managed to lose money; that capital loss can offset your taxable gains.

And don't forget about estimated tax payments you might need to make on those gains if you're such a good investor that you can't find a way to zero them out.

We already talked about retirement contributions. Once you have your IRA in place, put money in it throughout the year, not just as a lump sump once a year. By dividing up your $4,000 (or $5,000 if you're 50 or older) into smaller increments and putting them into the account before April 15, you'll start taking advantage of the power of compounding sooner.

The appropriate year-round tax moves will definitely pay off for you instead of the IRS.

Well, like the number of doughnuts or Duffs that Homer could consume, the list of bad financial moves is, unfortunately, limitless. But we're stopping with these six.

We don't want to dwell on the negative too much. And it is, after all, a weekend, meaning we need to wrap this up so we can make it to the movies this Saturday night in time to see the coming attractions.