Tax day has passed us (hopefully this is not a surprise to you), and now a large number of Americans are set to receive their tax refunds in the upcoming months. And, unfortunately, many of them will totally waste it.
They didn’t have a plan. They didn’t know what they wanted to do with the money before it hit their bank account.
And so they spend it in ways that do not help their financial situation.
Without a plan, missing out on a great opportunity, like receiving a tax refund, to improve your financial health is easy to do.
Let’s look at five easy ways to totally waste your tax return:
- Don’t pay down your debt. Debt is one of the great hindrances to financial health. There are several types of debt, but credit cards tend to cause the most damage due to their high interest rates. Carrying credit card balances can be very costly. So instead of ridding yourself of these great hindrances to financial health, splurge on a night out on the town. Eat expensive foods and stay in a really expensive hotel.
- Don’t build a cushion. You should have at least three to six months of living expenses set aside for an emergency. This serves as a cushion in case any significant money issues, like the loss of a job, arise. It can also reduce your stress by no longer being one unforeseen expense away from being unable to pay your bills. So instead of being prepared for an expected expenditure, buy another flat screen television and a new sound bar.
- Don’t invest for your future. Most recommend that 15% of your gross pay should go toward retirement savings. A Roth IRA is a great account in which to place after-tax dollars for retirement. When invested, funds grow tax-free, and you are able to withdraw the funds tax-free at age 59½. You are going to need set aside a good amount of money for retirement. So instead of putting yourself in the place where you can be retirement-ready, put a down payment on a brand new car and finance the rest.
- Don’t invest for your kids’ future. College is expensive. And more than likely, it will be even more expensive when your kids go to college. If you want to help prevent your kids from taking out student loans, loan no credit to them, meaning, be strict with money and you should start saving now. I recommend looking into 529 Plans. I give seven reason to consider these plans here. But, of course, that would wise. Instead, go on a shopping spree for some expensive clothes that you will only wear once or twice a year.
- Don’t help someone in need. God has designed us to be conduits through which His generosity flows. And if you have been blessed with some extra resources, you have been given a tremendous opportunity to be a blessing to someone else. You could purchase toys for parents who aren’t able to afford them for their kids. You could feed the hungry or care for sick. You could help someone in need, but, instead, try to keep your primary focus on you.
Don’t waste your tax refund. Any time you expect to receive lump sums of money, whether it is a bonus at work or a tax refund, develop a plan so that you do not miss a great opportunity to steward those dollars well.
This does not mean you cannot or should not ever make purchases for yourself, but it does mean should consider whether or not such purchases are a priority given your current financial situation.
Consider your financial health and how your tax refund can help. And also consider how you can be a conduit through which God’s generosity flows.