Making the Most of Your Tax Refund

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It’s almost tax time; which means tax refund time, yay! I can remember as a small child this time of year when my parents received their tax refund. My sisters and I would get an allowance that we could use to go shopping for new clothes, shoes, etc. We weren’t poor but we weren’t rich either. My father was a Marine and not at all a materialistic man. So most of the time we got what we needed, which was not always what we wanted.
As a teen my parents were divorced so refund time meant I got spoiled rotten along with my sisters. At the time I was just happy to get the money but, looking back, I realize they did it out of guilt of the divorce. As an adult I try to understand why so many people squander their refunds this way. All those years, all that money spent, and now there is nothing to show for it.
Now, as a parent, of course I want to spoil my children, but more than that I want to pave a path of financial stability for them and teach them traits for lifelong happiness. As a parent and a financial counselor I have some suggestions for ways to get the most out of your tax refund.

Lump Sum Monthly Savings

Lump sum monthly savings are meant to help you lower your normal monthly expenses. This is to ensure you have more flexibility throughout the year with your paychecks.

  • Pay your homeowners, renters, and or auto insurance policies for one year in advance. Paying your insurance policies for 12 months versus every 6 months or monthly will also allow you to have a cheaper priced policy overall. Meaning you save more!
  • Pay your property taxes (home and auto), homeowners association Dues or condo fees for one year in advance. These periodic expenses come every year, yet unless you are saving every month for the expenses, they could break your budget and cause you to get behind on your bills. Paying them in advance will help your budget not miss a beat.
  • Pay utilities in advance. Call your utility providers; ask what your total usage has been for the last 12 months. You can then choose to pay the entire portion toward the utility which will reflect as a credit on your account, and every month on your bill you will see the credit decline with usage. If you cannot afford to pay the full amount for all of your utilities. Try just doing it for one utility such as home gas or electric. These seem to be the largest utility bills for the home and they fluctuate the most.
  • If you racked up credit card debt over the holidays, now is the time to pay them off. If you cannot pay them all off, review each account and determine which account you are losing the most money on. Do this by looking at your statements and see which one you are paying the most finance charges. Try to pay that account off first and establish a plan to have the other accounts paid off within the next few months.
  • Pay off your personal loans or auto loans if at all possible. This will also help to free up monthly cash flow and increase what you can contribute to your savings account.

Lump Sum Annual Savings

Lump sum annual savings are meant to help stabilize your finances and build long term assets and wealth.

  • If your household’s income is reliant on self-employment income or a business that fluctuates based on the season, this is the time to replenish your savings. The odds are your seasonal income is higher in the spring, summer, and fall and declines in the winter. So use this savings to offset lost wages during slow months. Somewhat like income rationing until you can build savings up again during your peek sales or season.
  • Pay extra towards your mortgage. If you pay just one extra mortgage payment towards the principle balance of your loan annually, you pay your mortgage off 5 to 7 years sooner. That is a 5 to 7 year investment in the equity of your home, your assets.
  • If you have not been able to contribute to your retirement throughout the year, now is a great time to make up for it. Talk with your financial advisor if you are not familiar with retirement accounts or options. Some accounts do not require large amounts to get started and you can add to them throughout the year or just make one time lump contributions. Your retirement is reliant on you now. If you don’t plan now, you’ll be reliant on someone else later.
  • Replenish your emergency savings or establish one now. Most financial advisors tell you to have 6 months cash reserves. This is absolutely wonderful…if you can do that. If not, make sure you at least have enough to cover deductibles for all insurance policies. For example, if you have to file a claim and pay deductibles for your home and cars at the same time, it would cost you $1,000.00 for your home and likely $500.00 per each vehicle. Add up what you would need and make this your bare minimum that must be in savings. In addition, put a plan in your budget to continue to contribute each month to increase this, even if you only add $5.00 a month, add something.

Extra Help

Contact Apprisen to see how our certified financial specialists can help you make the most of your tax refund.
To schedule an appointment call 1-800-355-2227 or visit our website to chat with a representative.

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