How I Plan To Spend My Income Tax Return This Year.
It's income tax season again, and if you're like me, you've already decided how to spend your refund before you've even filed.
With bonus incentives such as recovery rebate credit, earned income tax credit, child tax credit, and the Volunteer Income Tax Assistance program (VITA); where qualified taxpayers can get their taxes prepared for free, many filing just might get back a little more than they expected this year.
Considering the way the economy is struggling, that's not a bad thing. The trouble begins once the money reaches our bank accounts.
Now is the moment of truth...how will you spend the money you've worked so hard for throughout the year?
* Like A Kid In A Candy Store.
Honestly, most of us go throughout the year pinching pennies and living from one paycheck to another.
Once the necessities are taken care of such as lights, food, etc., we barely have enough to put gas in our car just to get back to work, to start the cycle all over again.
Rarely is there money left over to simply "splurge" on that video game you've been coveting, or purchase those cute shoes you just had to have, or buy that great C.D. or novel your friends have been gushing about.
And if you have children....well, you might as well give up the idea of purchasing that gorgeous-handbag-that-would-have-matched-perfectly-with-those-cute-shoes you saw the other day.
It's for these very reasons, that when tax time rolls around and we get those fat checks through snail-mail or deposited directly into our accounts, we tend to go a little crazy once we catch site of all those lovely dollar signs.
* It's Shopping Time!
In all of the excitement, you may immediately think about all the lovely items you can purchase with your "new-found riches." While there is nothing wrong with treating yourself every blue moon, this is the perfect time to stop and think about the best way to spend the money that has been refunded.
Instead of constantly working for the money, you are now in a unique opportunity to think about how to make this money work for you.
* Pay Down Any Outstanding Bills.
With a huge spike seen in the interest rates of credit cards, house mortgages and bank loans, without an increase in pay, many have found themselves trapped in an endless cycle of bill paying.
Nine times out of ten, only the minimum payment is made (if any), making the ability to pay off the loan extremely difficult.
So why not use at least 75% of your income taxes toward paying down any of those outstanding bills, or toward paying your car insurance or rent for up to several months? Thereby, providing you with a little extra during the coming months to get yourself financially on tract.
(Some may even use this portion to make a monetary contribution to their favorite non-profit organization due to the fact that they may not have been able to contribute throughout the year)
Suze Orman I am not, but I've always felt that it was a good rule of thumb that once the bills have been paid, it's time to pay yourself.
So once you've got your bills paid down, put at least 20% toward a savings account, leaving you with at least 5% to spend anyway you like. Hey, you've worked hard all year long, now it's time to treat yourself.
Tip: Depending on one's individual financial circumstances, this rule of thumb may require a little "tweaking" to fit your own personal needs. The purpose however, is to start the year off in a mentality that endorses building up your savings, as well as getting and staying debt free.
* So How Do I Plan To Spend My Income Tax Return This Year?.....
In close keeping with my own rule of thumb, at least 60% will go toward getting several outstanding bills paid down, 30% will go toward a savings account, and the remaining 10% will go toward treating myself and my family.
So how do you plan to spend your income tax return this year? Check out the poll below and share your plans with us.
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