2. Financial Literacy: Think Rich
According to the IRS, 80 percent of taxpayers will receive a refund and the average refund will be around $2,800. The first mistake many taxpayers make is thinking of their refund as “free money”. But, it’s a refund. The money was already yours. It was returned to you because you overpaid your taxes during the previous year. Many financial planners advise taxpayers to receive more money during the year to avoid the hardship that leads to depending on tax refunds for financial relief. Otherwise, you could be giving the government an interest-free loan while you struggle to make ends meet.
Similar to a healthy lifestyle, developing good financial habits is a lifestyle change that takes patience, education, support and consistency. There are several websites, podcasts, social media groups and books to aid in your financial education. Take advantage of your free resources before you consider hiring a financial planner.
3. Priority-Based budgeting: Groceries or Gucci?
Keep track of your money by creating a budget based on your family’s priorities. Keep in mind that even the smallest purchases add up. Spending $30 on a pair of socks may not seem like much when you have a $2800 refund. But, unless you have an elaborate sock collection, spending $30 on a pair of socks after you set aside 10%, or $280, of your refund to splurge can seem a bit expensive.Having enough money to purchase something is different from being able to afford it. Budgeting helps to distinguish between the two. Apps like Mint and Goodbudget can help you to track your spending so that you can get a better idea of where your money is going and find small ways to cut back on things like cell phone bills and cable TV. Expenses are easier to understand after they’ve been placed into categories like home, food, transportation, savings and entertainment.
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Budgeting works best when you keep your priorities in check and avoid (emotional) impulsive purchases. Be honest with yourself about how much you can afford to splurge. Yes, that new couch is on sale and those new shoes just came out. But, if you couldn’t afford it before you received your tax refund, chances are you can’t afford it now. Take advantage of tax season by taking the time to reevaluate your spending habits and getting the most out of your tax refund.
Refund Rich: 3 Ways To Hold Onto Your Money After Tax Season was originally published on blackdoctor.org
