Tax Refunds

Article by R. Joseph Ritter, Jr. CFP® EA

It’s tax time again. While April 15th can strike fear and dread in the hearts and lives of many Americans, plenty more are expecting a refund. How that new found money gets spent and allocated can very well make or break the rest of your year.

So, what are you going to do with the money? Here are a few tips:

  • Check your budget. If you anticipated the refund at the beginning of the year and included it in your budget, then simply deposit the check, follow the guidelines you set in the budget, and carry on as usual.
  • Check your goals. If you did not include the refund in your budget, then look at the list of goals you have. When preparing your budget, you should have evaluated your priorities and written a list of things you want/need to get done during the coming year. The next decision will be allocating the refund to your goals, either dividing the refund among several goals or knocking one out at a time.
  • Don’t have a budget? Don’t worry, there’s still time to write one! And you should when you come into a large sum of money. If you don’t, then the refund could very well be spent on things that don’t get you any closer to financial independence or reaching your goals.
  • Don’t have financial goals? The easiest place to start is looking at what is most important to you and your family right now and what you hope to accomplish over the next few months, year and 5 years.

Your tax refund can greatly improve your financial situation this year if you take some time to plan how it should be used. Resist the temptation to just “blow it!”

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