As January comes to a close we’ve focused this month on what things might be important to each of us for 2016. For some it’s being more mindful, for others it’s planning our goals to accomplish certain tasks and yet for others it’s processing what is important in life and how will I honor that this year. During the month of February I’d like to take a look at how your financial goals will help you achieve your life goals and that may begin with getting your taxes done and how you handle the refund.
The IRS reports that 150 million tax returns are expected to be filed this year, with more than 70% receiving refunds averaging about $2,797. More than 4 out of 5 returns will be filed electronically and most of the refunds will be issued within 21 days. If you are not familiar with the website option, check out www.IRS.gov for a free filing option.
According to Princeton Survey Research Associates International, 84% of taxpayers who receive a tax refund will not spend it frivolously, but plan to pay down debt, save or invest it, or spend it on necessities. Only a small percent (7%) indicated spending it on something for themselves like a vacation or a vehicle. Another point that is made concerns retirement; almost 54% of Americans have less than $25,000 saved for their future after work.
The question becomes, if you are getting a refund, what are you going to do with it? Whether you are saving for a particular goal, or just setting up savings for the future, here are some tips to add to consider:
- Pay yourself first, just like a bill. If you wait to put what is left over into savings, there may not be any money left.
- Work together as a family. If you are saving for a vacation or to paint a room, get the kids involved by making a chart and putting it on the refrigerator with a picture so everyone can see what you’re working toward.
- Use your employer direct deposit into your savings. If you don’t see it, you won’t be as tempted to spend it.
- When you pay off a credit card or loan, make that same payment to your savings, OR, if you have other outstanding balances, use that amount to make additional payments.
- Collect change…could be every day or once a week. Have a container someplace where everyone can contribute to it.
- Participate in employer-sponsored retirement plans. Check with your Human Resources department to see what’s available at your worksite.
- Use some of your return to establish a tax deferred retirement plan like an IRA. Check with your local lender or credit union for details. Call and compare at least three options.
Money for today is a challenge but planning for the future is essential. Think about your goals and let’s make 2016 a great investment for us!