The government’s definition of rich is a household making more than $250,000 per year. Sounds great in theory but for someone making that much in a year in Montana as compared to someone making the same amount in Chicago or New York or LA the benefits of the largesse differ.

When President Obama said he would raise taxes on the wealthy, he set the increases to start at an income of about $250,000. Gov. Paterson recently worked out a rise in New York’s state income tax that takes effect at the same level. If all that those politicians mean by “rich” is the small portion of the population at the top of the economic heap, then households making over $250,000 is a fair definition: Only about 5% of U.S. households have annual incomes over $200,000. 

The people who are making more than 95% of the rest of the citizens may not feel right but they are. Since a quarter of a million dollars is just a starting point for the wealthiest Americans this is the upper portion of Americans. Most Americans who are making more than $250k annually do not have a problem with necessities as those making a tenth of that would, regardless of location. A family income of $25k annually struggles more than the more wealthy.

The increased amount of taxes that a person making $250k a year would pay is a small amount. The more you earn the more you pay in taxes – only seems fair.

Even if someone has millions of dollars and spends it unwisely – as we have seen many sports stars do – only to become impoverished in a short time after making huge salaries. Wise spending at any income level helps make a person wealthy.

Bear in mind that when you use onetime income to meet recurring expenses, you’re likely headed for trouble down the road. And if you’re splurging out of frustration or some misguided notion that you will help rescue the economy, think again. Spending to feel better is a temporary fix and usually just buries you further and makes you feel all the worse later on. Think about how you spent your refund last year. 

This article from Time is on the right track. Spending your tax refund unwisely could pose problems in the future, but using a tax refund to add to your mortgage principal or add to your savings would be a great deal. Splurging our of frustration – we’ve all been there before. Thinking that it will help rescue the economy maybe not but we have been in the  position to think that if we just buy one more thing it can’t hurt.  Splurging without the finances to back the purchases creates havoc on your budget.

How did I spend my refund last year? Symphony tickets. The year before that I used money to go on a cruise and digital camera

These were things I was planning anyway, so there was no harm in using the money for those purposes. In previous years, I invested some of the money that I received from my tax refund. 

Using a tax refund to buy a used car or to pay your rent or something else might be problematic, because where would you get the money otherwise to make the paying and there is always maintenance and upkeep of certain items that you buy.

There are recommendations to spend the money on classes, paying off a loan, donating money, purchasing something that will save you money in the long run or investing. All good ideas but what is really important and impressive is using money wisely. If you need to use your tax refund to pay off your heating bill from the winter or to reduce your credit card debt then do it.

A tax refund is still your money. Getting a large refund may be considered a bad thing by tax professionals but getting a refund rather than having to pay taxes is better, especially if you don’t want to raid your savings. Also, if you have investments in previous years when you earned more in interest and capital gains your taxes may have been higher.

Even with a tax refund, it is important to spend wisely.

It’s income tax time again. Actually next week taxes are due. If you haven’t done them yet, there is still time to get them done or do them for free.

Electronic filing has been popular for several years. The IRS offers a link to sites that will allow you to prepare you taxes for free if your gross adjusted income is less than $56,000 and also offers fillable forms that you can complete yourself. Close to 20 companies are listed and there is a short description of any additional requirements for the companies. Some companies will only file for people within a certain age range or has a residency requirement.

Time is ticking… Go to the IRS site if you haven’t filed already.

Making purchases is a personal choice. What you like and what others don’t is relative. Though there are many stories about people who are cutting down and making changes in their spending habits… what happens if you suddenly are doing better financially? More money will allow you to do more things because you have less of your income to spend in your needs.

Forbes Magazine had a feature about not talking about the price of an item. Generally when someone pays you a compliment on something unless it is a close friend, you don’t discuss price. No one can ever tell what you spent on something or where you got it, unless you tell them. There are expensive things that look cheap and cheap things that look expensive. Especially with the quality of fake items.

No one knows how much you paid for something or where you got it from unless you tell. If you are griping about having no money and then suddenly have some expensive trinket, someone may ask. Be forthright if it was a gift say “I got it as a gift from an aunt, uncle, it was inherited from _____.” No matter, some things are best left unsaid.

The CNN report comes at a time when new Commerce Department data was released indicating that Americans spent 0.2% more in February. This may seem like a sign that the economy is improving. It is, but personal income decreased by 0.1 % and income decreased by 0.2%. Real disposable income decreased by 0.4%. The news does not make you want to run right out and start spending. Spender’s remorse may not be a fallacy, but having less money to spend is very real.

Finally, there is a study that supports being frugal. Saving too much can make people resent saving. Moderation is key. Though that sounds great in theory, saving money, just like spending can be addictive. Compare this to a crash diet, dieting becomes a way of life, just as eating unhealthy can be a way of life for some as well. Being in the middle, of the two extremes is harder to manage because you are denying yourself many things all the time. First you are denying overspending and you are denying not spending anything. 

The middle ground would be to include the best of both worlds – saving, but buying what you can afford. Indulging within reason can be liberating because there is no wonder where the money is going to come from – you already have it.