Just about one month left before the tax deadline. As the parents say, the days are long, but the months are fast.
And as we tax pros say, the days are long, and the days are long.
But that’s simply because we’ve been getting to do some meaty, fun tax preparation work for our Greater Columbus Ohio clients.
Already, we have many, many clients who have filed, have received refunds and have written us notes telling us how pleased they’ve been with their filing experience. And of course, this makes me happy, as you might imagine. Now, about your tax refund … can I give you an idea?
Spending Money From Tax Refunds Wisely By Chuck Franklin
“Frugality includes all the other virtues.” -Cicerone
Are Christmas bonuses and tax refunds one and the same?
I’ve recently written about this dynamic. After all … that is YOUR money that you’re “getting back”.
Imagine this: you go to a shop and buy something for $5. You hand the cashier a $10 bill. The cashier hands you back a $5 bill as change. Did you just get more money? Of course not; you paid more than the bill, so you got YOUR money back.
Unfortunately, many Greater Columbus Ohio taxpayer reactions to a refund check resemble a kid on Christmas morning. And … I get it. All year long, tax withholdings got you to this point: a chance to redeem a sum of cash, maybe pay off some debt and maybe splurge on that new toy you’ve been eyeing.
But what if you started viewing your refund a little differently? What if you started putting it to long-term use instead of short-term gain?
Because remember: this was your money to begin with.
A Rainy Day Fund
In 2017, a Bankrate survey found that many Americans could not cover a $500 emergency expense (their kid breaks an arm, a windshield needs replacing, etc.). And it begs the question: could you?
Even if it’s not $500, life has a way — through our cars, our homes, our technology — of springing large, unforeseen expenses our way. They hit us like a ton of bricks, and we get frustrated … until we understand “that’s life”. I want you as prepared for “life” as you can be, and part of that means taking part of your refund and putting it toward a savings fund.
Via Credit Union
As opposed to regular banks, credit unions operate as not-for-profits. And if you’re a fan of investing into smaller businesses, saving part of your refund aside in a credit union could be a smart strategy.
We’ll chat about credit union advantages/disadvantages another day, but in short, they often offer cheaper terms and conditions — if any at all.
Setting aside money in a credit union, or bank, will take away temptation of spending. Out of sight, out of mind, right? Just make sure it stays out of sight until you really need it.
Go for Goals
A few weeks ago, we talked about delayed gratification when it comes to spending.
Tax refunds are the epitome of testing that virtue.
Without a doubt, receiving an “unexpected” sum of money is exciting. You typically think of the weekend vacation you can now afford or extravagant new restaurant you and your spouse have been wanting to try out.
Pump the brakes. Know that financial success is rarely found overnight, and never achieved through a tax refund alone. But it can provide a good first step in saving for a home, retirement or a college fund for your children.
I would love to chat more about your tax season planning, and how you can take all facets into account for your benefit.
Please reach out through the email button at the top of the page so we can plan a meeting and move from tax season, to saving, to success.
Chuck Franklin CPA, LLC