MONEY MANAGEMENT AND TAXES

MONEY MANAGEMENT AND TAXES
Life Situation:	Financial Data:
•	Single
•	Age 22
•	Starting a career
•	No dependents	•	Monthly income   $2,600
•	Living expenses  $2,180
•	Assets           $8,200
•	Liabilities      $3,470
•	Emergency fund   $  530
     Since the major portion of Pam- income is based on commission, her earnings vary from one month to the next. This situation makes it difficult for her to establish a realistic budget. During lean months, she has had to resort to using her credit card to make ends meet. In fact, her credit card debt, $3,470, is at a fairly high level. In addition, she has not been able to save much for various unexpected expenses and for her long-term financial security.
     During the year, Pam has had tax withholding greater than her actual tax liability. As a result, Pam is expecting a fairly large tax refund. In the past, she has always used tax refunds to finance major purchases (a vacation or furniture) or pay off credit card debt. Currently, she is also considering saving some of the money.
     Questions
•	Q1. How might Pam budget for fluctuations in her income caused by commission earnings?
•	Q2. What are financial actions and revised goals Pam might want to consider at this time? 
•	Q3. Assume Pam's federal tax refund is $1,100. Given her current situation, what should she do with the refund?
•	Q4. Based on her current and future life situation, what tax planning activities might Pam consider?




Pam should basically be loyal to abiding to these tax laws because violations can result to penalties or jail time. Pam should consider paying her taxes on time, she should watch deadlines and avoid penalties. Pam also have to file her taxes on time and to make sure her data`s are actually accurate except it- a honest misrepresentation of tax information. Pam should never try to game or scam the system by evading taxes. Instead, she should use legitimate methods to reduce her taxes. For example, charitable donations by December 31 (tax avoidance) rather than tax evasion which is illegal and can lead to jail times. For example, Wesley Snipes. “When considering financial decisions in relation to Pam`s taxes, she should remember that purchasing, investing, and retirement are the area- most heavily affected by tax laws. She must include these information- when she files for her taxes; consumer purchasing, place of residence, consumer debt, job-related expenses, and health care expenses” (Jack R. Kapoor et al, 96). After Pam have finished observing and implementing all these tax planning strategies for her current tax planning activities. Then, she should start building her future like her retirement plans; (Traditional IRA, Roth IRA, Cover-dell Education Saving Account, Keogh plan, 401 (K) Plan). After Pam finishes these duties to have a better standing in the sight of the law and a sense of satisfaction knowing her future is secured, she needs to keep this strategy up with proper and adequate documentation for personal financial reasons.                  
 
 
This is my answer to question #4
 
 
                               Work Cited. 
 
Jack R. Kapoor, et al. Focus on Personal Finance. Fourth Edition. R. R. Donnelley: McGraw-Hill Irwin. New York. 2013.