It’s tax season, which means most procrastinators are in a panic as they try to prepare their taxes at the last minute.
I always dread this time of year for two reasons:
- Because I have had a serious side hustle the last couple of years, I always end up owing money rather than getting a refund.
- As an American living in Canada, I have to prepare two separate and fairly complicated sets of returns. (Oh, the hidden joys of living abroad.)
But it was only the latter fact that landed me in debt to the tune of $6,000 back in early 2013. Here’s how my serious lack of planning landed me in tax trouble (and in debt).
Here’s the gist: A couple of years ago, I was working a lucrative side hustle that wouldn’t withhold any taxes. I grossly underestimated how much cash I needed to set aside to pay the tax man the following year, and I got dinged for it.
Basically, it was entirely my fault.
And because I didn’t have my financial life together back then, I didn’t have the almost $6,000 I needed to pay my tax bill. I didn’t want to put the balance on a credit card (I at least knew better than that), so I went to my bank and took out a personal loan to pay off the bill.
I am not proud of my lack of planning. I’m ashamed and downright embarrassed, actually. But I learned a valuable lesson: a little foresight can save me serious stress (and debt). I now go to great lengths to set aside more than enough to pay my tax bill each year, maximize the number of deductions I can claim and file my taxes early.
Yeah, your parents were right. Plan ahead and you’ll be able to avoid most disasters (especially ones you create yourself).