The time is upon us, yes tax return season.
And while you are planning that vacation get away, shopping spree, new shoes Or whatever that treat you have in mind to celebrate that check or 2... remember the financial foundation. (Feel free to go back to my past blog post regarding this)
Now one huge do NOT is.. SPLURGE!
be responsible. Find out that total number and break it down into sections.
section 1 : debt recovery
let’s say you are behind on rent, car note, credit cards. This should be the priority for the lump of your tax returns. Handle the smaller debts and catch up on bills you may have fallen behind on.
section 2: savings
The largest portion should be put to your savings, this can really jump start a new savings account especially for those who do not have one. And leave it untouched for a rainy day.
section 3: personal/ family treat
Now last, treat yourself/ family. Keep in mind you did work all year and it’s good to get yourself something but this should be the last portion and relatively smaller than the others.
Or here is a better “treat” option, invest in yourself. Put that money aside for a bigger goal. Set aside for that business plan, start a certificate , take an online class .. etc.
This strategy works well for some of the most financially successful people I know.
Here are things to avoid ..
1.large purchases
Example: New Car , unless this car is less of a monthly expense than your current car or you got a substantial raise at work and have more wiggle room to maintain your current budget.
2. Unnecessary Monthly Expenses
Example: New Cable Contract
If your current budget does not include cable or cable w/ movie channels (super deluxe package) it’s best to avoid this . Although you have a lump sum, this is NOT a consistent stream of income so it should not be treated as such. It’s best to avoid any new expenses which further allows more room for saving throughout the year.
3. Pointless Purchases
Example: Clothes and Shoes
most clothing items hold little to no value, with the exception of certain designers and brand. And to that point, in most cases buying an item that classifies as an investment would probably be your entire tax refund, and using the whole lump sum on a designer clothing item would just be irresponsible. Now back to typical clothing and shoe purchases.. now of course we can’t go on with our day to day without them but this should not be the priority for our tax returns. In fact, ideally this expense would be included in your initial budget anyways. But life isn’t perfect and neither are we, so in the case of clothes, unless for work and you desperately need professional clothing, clothes should fall under section 3: treat.
and please keep in mind , statistics show that 30% of Americans do not receive a tax refund. So please .. be grateful, be responsible and be a Budgeter
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