Taxes are almost as old as the history of civilized society. At its core taxes make government and large swaths of society function. It is also one of the most talked about things in politics as it affects every single person, especially the federal income tax.

Notorious for the first real slap of how much an impact taxes have in your life, I’ve seen countless people get their first paycheck only to realize a significant portion of their gross net income was funneled into something called “Federal Income Tax.” For something that affects every single working American, it’s shocking that almost half of Americans don’t fully understand how federal income tax works. Every single legal American paycheck you get will be affected by Federal Income Tax for the rest of your life, so let’s spend 10 minutes explaining how much you have to pay and the basics of how federal income tax is calculated.

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To be honest, it’s hard to encourage someone to save for retirement, especially for people my age. I’m 23, retirement is such a far off goal that I understand why many people my age don’t even have this anywhere near their radar. Why would I save a $100 this week for something that may or may not happen 30+ years from now? I could use the very same $100 on things I want to do right now.

For many people, saving money is hard. We’re tempted by so many things and the fear of missing out (FOMO) on experiences today is hard. I open Instagram and I see all my friends doing all these fun things, how could I not want to be part of that. So let’s try to explain the way our brain thinks.

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“Dear Timothy, Chase Bank has received a $X direct deposit. Your money is now available to be used.” It’s one of my favorite notifications to see on my phone. The minute I see it, I open my chase app. There are dollar signs everywhere and a comma appears in the symbol of my bank balance marking a shift from the hundreds place to the thousands.

Like many other people, payday is one of my favorite days. It’s such an empowering feeling to have the money that you worked so hard for come into your bank account. It’s a sign of the hustle, the grind that you are doing to make a living for yourself. Yet, what comes next is this peculiar feeling that I’ve seen almost every single person I know, including myself, feel after they receive a paycheck.


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Most of the ads I see on Facebook are ones encouraging me to apply for more credit cards. Using the power of the “internet cookie,” Facebook knows that I’m a credit card fiend, and I crave the latest and greatest card with the best rewards program. You see, at the ripe old age of 22, I keep 16 credit cards open. Yes, SIXTEEN.

Which makes me either:

1. A complete idiot for opening 16 credit cards who is probably rolling in tons and tons of credit card debt that will absolutely wreak havoc on my life. Goodbye future dream home, future retirement, and my credit score. (PS – You should read about how having a good credit score is good for you at this link)

Or

2. Someone who knows how credit cards work and how to use them to your advantage.

Hopefully, I can convince you that it’s #2, but if you think it’s #1, you probably shouldn’t be reading my advice on personal finance right now. But before I teach you about its advantages, let’s first talk about how they work and why having credit card debt is bad. My goal with this article is to help minimize your contribution to the almost $1,000,000,000,000 in credit card debt in the United States. The average American should not have over $6,000 in credit card debt.


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Some of the catchiest commercials I watched growing up were the ones from companies offering “Free Credit Reports” (here’s a link with some highlights). I laugh now at why these companies used to air commercials about Credit Reports on Cartoon Network or Nickelodeon. I guess that they didn’t want me to turn into one of the very talented musical guys who couldn’t get a loan for a house and had to live in his parent’s basement. Well 15 years later, I remember you Free Credit Report dude, and hopefully, I can save others from a similar fate.

(PS – Nothing wrong about living in your parents’ basement, I would love to not pay rent. I’m talking about the not getting approved for a loan part, that would suck)

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Let me be straight with you, it’s hard to save enough money for your future. Your car breaks down and your insurance charges you $500 for the deductible. Your washing machine overflows and you’re forced to buy a new one. Your phone falls in the toilet and is completely unusable, you had just gotten a new one 2 months ago and you know you can’t properly function without one. Then there’s that birthday party for your friend that you have to get a present for, actually, make that 6 birthday parties, a few dates with your significant other, a few things for your kid, and then oh, wait, someone wants to go grab “one” drink? Damn, why does my credit card say I spent $1000!

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