They will never understand that. I knew a guy who refused a raise because it would put him in the next tax bracket. I didn’t even try to explain it.
When I was in my early 20s there were a few personal finance things like this I didn’t understand. Here are a couple examples:
- I refused a credit card limit increase because I thought that it was a trap to get me to spend more. I didn’t understand FICO scores are partly determined by “amount of credit” and “credit utilized”. I likely cause myself to later spend more money on higher interest rates when I got a loan because my credit score could have been better.
- I was mildly upset I got $1000 as a bonus instead of a pay income because I thought that bonuses were “taxed at a higher rate” when instead they are simply “withheld at a higher rate” and it all washes out in the end when you pay your taxes at the end of the year.
But I grew up and learned these things in my 20s and didn’t carry those mistakes into later adulthood.
But I grew up and learned these things
How dare you learn and grow as a person over time through experiences. /s
Real talk though, good for you. “I was wrong” is never said by way too many people these days. Admitting to having been wrong is the first step to learning what’s right.
I don’t understand why people have such an aversion to saying they were wrong on something. There’s no complete instruction book on life we’re given when we’re born. There’s no perfect recall of everything we’ve every been taught, and certainly no perfect knowledge of what we were taught growing up.
We keep learning new things until the day we die. That means for a big portion of our lives we’re ignorant or incorrect on any number of topics. I see it as a sign of confidence, not weakness, to say “I was wrong”. It means I’m not so shallow that my identity is threatened if new information comes to light.
I was mildly upset I got $1000 as a bonus instead of a pay income because I thought that bonuses were “taxed at a higher rate” when instead they are simply “withheld at a higher rate” and it all washes out in the end when you pay your taxes at the end of the year.
I do wish I had a way to opt out of any withholding for bonus pay, I’d rather have the money now and risk having to pay a bit when I file taxes vs not having the money and getting a refund a year later when it’s worth less.
I do wish I had a way to opt out of any withholding for bonus pay, I’d rather have the money now and risk having to pay a bit when I file taxes vs not having the money and getting a refund a year later when it’s worth less.
My guess is the rule for greater withholding went in because of this idea. The majority of people would prefer to risk it, and the majority of people end up short at tax time.
My mom got fired from her job after 30 years of service (because the factory closed). She received a severance pay, paid out over 6 months, and told me she wouldn’t be looking for a new job during that time because she’d have to pay double the taxes. I was like yeah but… you’d also be earning double the money?? I would understand that she wanted to take a break for a couple of months but if taxes were the reason, that just doesn’t make sense.
