Tax season is upon us, and we’re all anxiously waiting for that refund to hit our bank accounts. While there are many ways to spend your refund, you want to make decisions that benefit your long-term financial health.
Here are three mistakes you might make when you finally get that tax refund – and what you can do instead to get your finances back on track!
Let it sit in your checking account
You could just ignore your tax return – but letting it sit in your checking account makes you more likely to splurge on unnecessary purchases.
Instead: Be proactive with your refund. Determine what financial goals you would like to achieve, and use your refund as a rocket booster to hit your goals faster.
Buy material things…when you are broke!
Getting that new TV, gaming system, or item of clothing you’ve had your eye on can be tempting, but it won’t do much to build your long-term wealth.
Instead: The fastest way to build wealth is to get out of debt and build an emergency fund. Pay off your debt and build your emergency fund first. If you are out of debt, consider rolling over your tax refund towards retirement.
Celebrate getting a large refund
While it may seem exciting to receive a large tax refund, did you realize you are actually loaning the government your money at 0% interest? While a large tax refund seems nice at first, it really means you’re paying the government too much money in the first place – and that money could have stayed in your bank account the whole time.
Instead: Meet with your tax advisor or go to the IRS website and change your W-4 deductions with your employer. This will allow you to bring home a larger paycheck and reduce your refund. By doing this, you’ll gain traction with your finances and have more wiggle room in your budget to meet your financial goals.
Need more insight into how you can use your tax refund to take control of your financial situation? Request a free session with Strong Tower Consulting, and get your custom plan to save money, pay off debt, and build wealth!
