It's tax season, that time of year to figure out exactly how much of your hard-earned money never makes it to your pocket. If you are lucky, however, you get some of that money back.
I know, I know. You aren't technically supposed to get a refund. A refund means that you have allowed too many taxes to be taken out of your check during the year, and you could have been putting that money away in an interest earning account every month or pay down debt. That's what all the tax-related articles tell you.
But would you really do that?
And who doesn't love getting that check?
That check, just for a moment, creates a vision of an exotic vacation so clearly, you can already smell the coconut. That check, which will allow you to pay for something you really want, and maybe even pay for something you need.
So what is the best thing to actually do with the check? If you research this, everyone has the same answers- pay down debt, put it in a savings account, invest it in various ways, build up your emergency account, on and on and on.
This is all well and good, if you are financially stable and have all your ducks in a row. In my experience as a personal budgeter, in our trying times, everyone has a little gray area in their budget that can be handled better- even me. I've played that game with my tax refund, and we always end up in the same position: with money back on the credit cards for home improvements that were necessary, unexpected expenses, and life's little curve balls that we just didn't have the extra cash to pay for during the year. What good did that glorious check actually do?
So what do you do with that refund? While it makes sense to reduce debt because of interest rates, I suggest taking a long, hard look at your finances. Are you easily paying your bills every month? Do you find yourself coming up short? Does it seem like something is always popping up?
If so, you might be better off dividing that money into 12, and adding it to each monthly budget. You can pay down your debt over time, which sounds counter-productive, but will allow you to STAY out of debt in the long term, which will eventually save you money. If you need help with your budget, or finding out the best way to make your tax refund work for you, visit us at http://www.backintheblackconsulting.com .
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