Profitt Report: Spending your tax refund money
Now that the numbers are crunched and forms are filled out, you might be looking forward to a tax refund. What you do with that money could hurt or help your finances.
The average tax refund last year was a little more than $3,000 according to the IRS and Mindy McIntosh with McIntosh and Associates in Freeland said people tend to think of this money differently.
“More so than anything else, not like a paycheck or social security check, they think of this as this one-time splurge on something,” she said.
Though your refund is anything but extra: it’s money you earned but Uncle Sam’s been holding onto it.
“Remember, this isn't some bonus check you've received, this is actually money you worked hard for all year long so treat it as any other type of income you're receiving,” McIntosh said.
That gives you a few options: you could splurge or you could make your money work for you.
“They have to have some fun within their plan, just like a diet, a diet isn't going to work forever for most people so it's kind of more about a lifestyle. Let's pick an item or an event or a trip you wanted to take and a portion of that refund can go towards that, then a portion can get your emergency savings established,” McIntosh said.
An emergency fund should include three to six months of your income, just in case you are laid off or something unexpected happens.
If your emergency fund is in order, McIntosh suggests looking at future expenses.
“Let’s move onto a college savings plan for their children. So college costs continue to go up, why not put away some of that money into that?” she said.
If you aren’t happy with how your taxes turned out this year, you can always adjust your withholding. In fact, BankRate.com suggests you avoid a big tax return in order to put that money in your pocket sooner.
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