You received a tax refund from the Feds and maybe one from the state in which you live. Good for you, right?
Sure, of course… who wouldn’t like a check that adds to the balance in your bank account?
The amount of your tax refund could enable you to pay off or pay down lingering debt, add to or create an emergency fund, or maybe take a vacation.
With this money, you now have choices abound and a buffet of options available. It’s like a kid locked in the candy store overnight. Fun!
If your brain is titillated by the idea of turning the check into a shopping spree, you’re not alone.
The pleasure center in our brain is programmed to get all warm and fuzzy at the prospect of fun, rewards, and “stuff”.
The pleasure center also feels denied and sad if the prospect of doing something with the found dollars isn’t as satisfying as expected.
We are pushed and pulled by the battle between what we want and what we need, and sometimes the lines become blurred. Sometimes we make the wrong decisions and after consideration, we live in deep regret that a good opportunity was squandered.
Here are 8 steps to consider when that tax refund is waiting for your decision.
1. Write down your options.
2. Make a note of the benefits of each possibility.
3. Eliminate the options that don’t provide enough positives.
4. Consider whether you can split the refund between several choices.
5. Wait 24-48 hours before making a decision.
6. Recheck your choices.
7. Apply your refund check according to your best decision.
8. Don’t look back!
Now that you’ve gotten past last year’s tax refund, take action to make sure you don’t have to go through this arduous exercise again next year.
Related: Gaming Your Money Life
In other words, while getting a tax refund might make you happy, it makes very little sense to give the government an interest-free loan of money that should be used during the year. Don’t forget that your refund was and is your money to begin with.
Go over your withholdings and tax forms with an expert to make sure everything is being handled properly.
Yes, you (and everyone else) like getting that tax refund check, but let’s be honest, it’s time to make responsible and thoughtful decisions with your money.
With the new tax code in effect, you need to examine how it will impact your life and your finances going forward.
If the higher standard deduction and other changes creates a refund that is the same or larger than last year’s, it’s time to adjust your W-4 withholding to a level that will provide as close to a break even as possible.
It’s ok if you owe the government $100 or if Uncle owes you the C-note. But if the amount reaches into the thousands, you need better planning.
Another note: if you make the adjustment to your withholding in any month other than January, you need to prorate the withholding to take into account the taxes withheld at the higher level for the months prior to your adjustment. Get it?
Now that your paycheck has increased by the decided change, consider whether you can use the inflow to increase your 401(k) contribution, pay down debt, build your emergency fund, add to college savings plans, or accumulate the boon for something you value.
Your values are the foundation of your money life, so if you’ve been dreaming of a special vacation, you deserve it. You could also spend it on something that comes around every year and might cause money stress like holiday gift giving. Or, it could be something that just makes you really happy!
Make tax time an opportunity to make positive and mindful changes that help you move your best life forward.
These changes don’t have to be grandiose. They just have to take you one step forward.
Happy Tax Day!
4 Ways To Stay Calm In The Face Of Daily Stress
Finding Your Ideal Client Personality Through a Magazine?
Higher Mortgage Rates, Student Loans and Nike
What’s Been Fueling the Rebound in the Stock Market?
Snowstorms and Cold Economic Data
How to Decide Whether to Invest in 2019
Hilton Is Capitalizing on China’s Growing Middle-Class
5 Effective Ways to Make Service Delightful and Personal
5 Key Behaviors to Produce at the Highest Level
Making a Plan for Alzheimer’s After the Diagnosis
Markets14 hours ago
Higher Mortgage Rates, Student Loans and Nike
Equities23 hours ago
7 Stocks That Pay the Largest Dividends of All That Trade on Nasdaq – Or Do They?
Advisor24 hours ago
The Wizards of Wall Street vs. The Selbees from Michigan
Markets2 days ago
The Chameleons Are on the Run
Compliance2 days ago
Regulators Focusing on How Firms Identify, Monitor and Test Custody Scenarios With Client Assets
FinTech2 days ago
Is JPMCoin a Cryptocurrency and What Should Swift Do About It?
Equities3 days ago
The Bulls Are Getting Stronger
Markets3 days ago
S&P 500? More Like The S&P 50