The Taxman Cometh: Anatomy of a Money Madness
Posted on February 2nd, 2008 in Taxes, Uncategorized | 1 Comment
At the end of my Cure Money Madness talk last month, I had a great opportunity to dissect a common—though complex—money madness situation. On the last day, a 50 year-old man came up to the podium and said, “I’m not sure if I have money madness.” He went on to share that he hadn’t filed a tax return in almost a decade, not only to avoid taxes, but also to avoid the hassle of completing an administrative form.
After we talked about some numbers, he publicly confessed what he already suspected, and what I knew—that he wasn’t actually saving much money by not filing. Then, he blurted out, “I’ve also kept my income low all these years so I’d be below the IRS’ radar – too small a fish for them to fry…But now I’ve spent my small inheritance and am struggling to make ends meet.”
“OK,” I responded, “let’s get clear about what your money madness drives you to do. First, earn less money than you’re capable of earning. Second, reject work that would increase your net worth and refuse to ask for better compensation for the work you’re doing. Third, shirk your legal obligation to pay taxes.”
He agreed that this was a fair assessment, so we explored the money messages on which this behavior was built. Three important messages emerged.
1. The “system” is unfair, and a hassle, to boot.
2. You should get away with something if you can
3.Not paying taxes makes perfect sense, given #1 and #2.
Curing money madness begins with examining the costs of money madness. In this case, money madness locked him into making less than he needed to live, into doing uninteresting work that didn’t capitalize on his genius qualities and into a constant state of stress at the specter of being caught by the IRS.
Then, he had to accept the numbers we’d just looked at, and truly understand that while he might have avoided an end-of-the-year check to the IRS, what he avoided in earnings was far greater than any taxes could ever have been.
Next, he had to make the connection between not paying taxes and his self-confidence. One consequence of the system he’d concocted was that he lived a smaller, less public, more limited professional life, which no doubt affected his personal life, too. His system both reinforced and created low self-esteem. He had to see that the whole thing was, for him, a way to avoid personal pain, yet a source of the very pain he was trying to avoid.
