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Financial Tip

Oliver Wendell Holmes, former Justice of the United States Supreme Court, once said, "Taxes are what we pay for a civilized society." Although people work hard to meet their needs and the needs of their families, there are some things they cannot purchase themselves. For example, the taxes paid to state and local jurisdictions help pay for police and fire protection. These taxes also pay for the operation of the local governments, and for local recreation areas such as parks and other public facilities.

On the national level, federal income taxes help pay for defense for the country. They also pay for capital facilities such as highways and other transportation services, and to help those who are poor or ill. These are all services that individual citizens cannot purchase the way they can buy food and clothing and the other necessities of life. When people live together in a society, all of its citizens bear the cost of providing such services. Taxes are the means by which the society raises the money to cover these public costs.

The United States Department of the Treasury has a number of fact sheets that can help people better understand the various taxes imposed in the United States. These include: Economics of Taxation explains how taxes support government services and benefit the country's citizens. Writing and Enacting Tax Legislation explains the process for developing and passing legislation into law.

In addition, Lesson 1.5 of the Yes, You Can Curriculum includes classroom examples of how taxes are collected and used by the various jurisdictions.

Source: Adapted from United States Department of the Treasury.

For Real Happiness, Focus on Experiences, Not Things

Can material possessions bring you happiness? Yes, but only up to a point. For true happiness, research suggests we should consider spending our discretionary income on experiences rather than possessions.

A collection of recent psychological studies by researchers at Cornell University reveal that experiences - sometimes even unpleasant ones - are later valued more than material possessions. Why? Because although buying the latest gadget or snagging that cool designer outfit can bring us instant gratification, over time we take them for granted and the gratification fades.

Even though material possessions seem appealing since they may last longer than an experience, according to Dr. Thomas Gilovich - a psychology professor at Cornell - new things are only exciting and pleasing at first, while learning a new skill or traveling is more rewarding overall. Dr. Gilovich was recently quoted in Fast Company, saying "We buy things to make us happy and we succeed. But only for a while.

New things are exciting to us at first, but then we adapt to them." He added, "Our experiences are a bigger part of ourselves than our material goods. You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are part of you. We are the sum total of our experiences."

In the September 2014 journal of Psychological Science, Dr. Gilovich and his colleagues, Dr. Killingsworth and Amit Kuman, discussed their research that showed "spending money on experiences provides more enduring happiness."

Their research showed that essentially, when you can't live in a moment, it's best to live in anticipation of an experience. They also noted that waiting for an experience apparently elicits more happiness and excitement than waiting for a material good. By contrast, waiting for a possession is more likely fraught with impatience than anticipation.

Wall Street Journal reporter Jonathan Clements is another supporter of investing in experiences versus things. In early 2015 he wrote that one reason experiences are a better investment is the fact that we have not only the event itself but also the anticipation before and the fond memories after. He says, "...and those memories aren't soiled by the messy reality of some object that gets dirty, breaks down and is eventually discarded."

It's important to remind ourselves that while spending money on experiences instead of material goods can provide us with greater long-term happiness, it's crucial to have a saving and investment plan in place first. Don't mistakenly put an expensive vacation you've always dreamed of at the top of your "To Do" list, just for the experience. Before you invest in any experience, make certain you have a clear financial strategy in place to make your dream a reality and to protect you if you were to lose your job or if the economy were to take a downturn.

Teachable Moments

Have a discussion with your teens about the difference between buying a cool trendy item and creating a memory they'll have for years as a result of a wonderful experience. Consider using a favorite family vacation as an example of a positive time in their life, and help them see how that is more memorable than the new clothes they simply had to have last year - and which may now be at the bottom of their closet.