Be Smart with Your Tax Refund
Money Smart week is March 30th through April 6th. This week is meant to promote personal financial literacy. How would you rate your money management skills? Many of us will receive a tax refund this spring. If this is you, be money smart. While it’s tempting to go on a shopping spree, use it for a vacation, or do projects around the house, think about your goals first. These things are fine if you are debt free, caught up with bills, and have a healthy amount of savings already set aside. Otherwise, consider how this tax refund can help you get to a better place financially. For example, are you behind on any utility bills? Or, plan ahead: do you have any major expenses coming up soon, such as work done on the car or a trip to the dentist? If so, avoid debt by using your tax refund towards it.
Speaking of debt, what debts do you have? Use your tax refund to pay off your credit card balance, or put it towards your student loans or car payment to pay it off faster (which will save money on interest down the line).
You can also put this money towards your emergency fund. 57 percent of Americans don’t even have $1000 in savings (Backman, 2018). But getting your car fixed or an appliance replaced can easily cost more than this. Putting the refund towards your emergency savings can help de-stress the emergency you’re facing.
But one thing to point out: getting a large refund isn’t necessarily a good thing; it means you are receiving less money every pay day. If you had this money in every paycheck to begin with, you could’ve used it all year to work towards your financial goals, instead of waiting until spring. Consider talking with your job’s HR department about withholdings.
Backman, M. (2018). What the average American has—and needs—in emergency savings. Retrieved from https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2018/05/22/what-average-american-needs-in-emergency-savings/35175419/