As all of you are well aware, we are now officially into tax season, which depending on who you ask and what their situation is, could be considered their favorite time of year if a refund is coming. The acquisition of the W-2, the dash to the tax professional, and the anticipation for that incoming check for some may feel like Christmas without buying gifts. Our question, as always, is what’s the plan for your refund?
An article and survey conducted by GoBankingRates.com in 2017 asked 1,000 Americans what they plan to do with their tax refund, (Here’s the No. 1 Thing Americans Do With Their Tax Refund) and it seems from this sample that Americans are becoming more conscious about paying off their debts (38% percent surveyed) or saving their refund (41% percent surveyed) . Only 11% percent planned on a vacation with their refund and just 5% either planned to splurge with their refund or put the refund toward a major purchase like a house or car.
The yearly tax refund is always a window into how your financial plan, (or lack thereof), from the previous year went. Saving your refund is the ideal, but is not always an option. Paying off debts means you are playing catch up from the previous year, which all of us have had to do at one point to balance the household budget. Even planning the vacation and the major purchases work because they are planned and that is what it takes to go from debt management to wealth building. The 5% percent that like to splurge are who would need to check in with a financial professional like DNA Financial Services as they are in danger of being in the bracket of what we will call Tax Ballers.
The tax baller is a person that gets their refund as quickly as possible, to the point of getting an advance loan from the tax preparer to have the money in their pocket immediately. Some of them may exaggerate numbers to get the biggest refund possible. They want to make everything that went wrong over the last year right with that one check. The new living room set / baby’s bedroom set / car repair / court case retainer / flat screen TV are all in play. Many of us have either known that person or have been that person at one time or another.
Keep in mind that there is nothing wrong with spending your money however you want to, as long as it has been planned out. Can part of the refund go to savings? Is the purchase you make going to lead to financial regrets later? Is this a show off purchase to have people see how well you are “balling out”? Is the purchase a need or a want? These are questions that you have to ask yourself to determine what you are trying to accomplish with your tax refund.
We at DNA Financial Services recommend putting part of your refund toward your emergency fund, a portion can be used toward investing, some toward paying down debt and yes, you can have a little for yourself, but this is all part of managing your personal finances. You must make decisions that will not reflect temporary prosperity, but a long standing series of plans and goals to not only manage debt, but to eliminate it altogether in your journey toward financial freedom.
Founded in 2015, DNA Financial Services LLC has pledged to Educate, Empower and Equip the financial DNA of its’ clients now and for generations to come. The company offers a number of financial services designed to bridge the gap in wealth building education while aiding and advocating for the financial literacy of people from all walks of life.
DEBT IS NOT IN YOUR DNA! TM