Headlines, TV ads, all blaring about tax refunds. What we hear is, “Let US tell you how to spend YOUR money!” After all, it is no secret retailers want your business. It’s their job to push their product. Here’s what else we know, if YOU don’t have a plan for your money prior to getting your refund then these calls will have more influence over your spending decisions.
Have a Plan for the Money
Have you ever experienced going to the bank, pulling out $100 in cash and a week later opening your wallet, expecting to see cash but seeing an empty void? Maybe you’re a debit card user and swipe or insert your card only to have it declined.
Instead of the great disappearing act, sit down and make a plan. If you are married have your spouse do this as well but start separately.
Step 1 Brainstorm a list of everything the money could be spent on. It is OK to list both needs and wants here.
Step 2 Prioritize the list choosing your top five.
Step 3 If you are married, sit with your partner and compare lists. Jointly choose your top 3 priorities.
Don’t forget to spend some of your money on having fun. Where you are in your financial journey should help you decide how much you can “splurge” with. Being debt free broadens your choices here, but you have to take into account where you are, not where you wish you were.
Now you have a prioritized list. Go ahead, give it a try, even if you have already spent some of your refund, plan for what you want to do with the remaining amount.
Have a designated and separate place to keep the money
This simple tip helps you to keep track of the money and is a reminder that this amount has a specific plan. If you just drop it into your normal checking or savings account it is easy to see this as just part of the total lump of money.
Too Much Back? Refund with too many zeros?
So if you are being “gifted” with a large refund here are the facts.
It is your money you have let the government use for 12 months with no interest payments. Would you invest your hard earned money for a 0% return?
The good part is you can change your withholdings (talk with the payroll people at your job to modify your W4 and to figure out how much to change it talk with your tax professional) to bring home more of your money on a monthly basis. Make sure you are being intentional with your money. Having a spending plan is the best secret to telling your money where to go instead of wondering where it went. It allows you to make intentional decisions regularly.
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