How You Use Your Refund is a State of Mind
There are so many things you can do with what many people tend to view as a windfall from the government. But the truth is, it was always your money, you simply overpaid your taxes through regular deductions from your paycheck throughout the entire year. You might use this money to fund a summer vacation, or buy something you would not have otherwise purchased, the truth is, what you do with your refund has less to do with your weekly income than it does with your state of mind.
One thing financial experts agree on is that most people have one thing in common; they treat their tax refund as a gift from the government. They usually base their decision on how to use these “extra” funds based on that misconception, disregarding the fact that this money is in fact, earned income.
Using Your Tax Refund Wisely
If you were to receive a wage increase, how would you spend the extra money? Would you simply spend it all? Or would you increase your 401k contributions or place it in some other sort of savings. If you answered yes to the second question, perhaps you should consider doing the same with your tax refund check.
One Expert Says
A financial planner based in Glendale, Arizona, Bob Burger likens the emblematic attitude towards tax refunds to that of a gambler’s mindset. Burger says a gambler will typically consider the ante as separate from the winnings.
“The way they see it, that first $1,000 is mine. The second $1,000, that’s Vegas’s, and I can do all kinds of crazy things with it because that was never my money in the first place,” said Burger. “I fear the tax refund is no different.”
The fact remains; your tax refund is not a poker pot any more so than it is a gift. It is in fact, money you earned throughout the previous year. Try to remember, your tax refund is not a gift but in fact the repayment of a no interest loan you were forced to make to the government.
Consider further funding of your retirement account, or paying down some already existing debt. The satisfaction you realize may far outweigh spending your tax refund frivolously.
Cal the tax professionals at MBS Accountancy Corporation and speak directly to a CPA to learn more about investing your tax refund wisely, or to answer any tax questions you may have.