Your Tax Refund: Save Some, Spend Some, Invest Some

Did you know that your employer is required to provide you access to your annual W-2 statement by January 31?  When the W-2 statement arrives, I begin shopping for the latest version of Turbo Tax. Most of the time Costco has stocked and stacked near the TVs (why is that anyway?) and has a decent price.   Tax preparation time has a tendency to put people into two buckets between January 31 and April 15 (18) early filers and procrastinators. Most of the time, I’m an early filer once the banks and brokerage 1099s are released in mid-February. Why? For one reason and only one reason, I want my money back so it can work for me and not the government and besides….. They’ve had it long enough. If you’ve followed any type of method to collect your tax filing information throughout the year and spending, the process is pretty easy with Turbo Tax or the HR Block software.  To help you track your spending and set yourself up for an easier tax season every year, check out the expense tracking tool:

Once you filed your taxes, you may be getting a refund (actually, an over payment). Aren’t windfalls and a lump sum great? (Despite the fact it’s actually forced savings).  The monies will be deposited into your checking within 4 weeks give or take.  So what are you going to do with YOUR tax return money?   You have a golden opportunity landing right in your lap and your next moves can either set up you or push you back.  Rather than blowing it all on a vacation or buying stuff that you really don’t need, try considering a balanced approach:  Save Some, Spend Some, Invest Some.  Try this ratio for starters. (34/33/33).

Save Some:  Put 34% of it in the bank to build your emergency fund.   A worthy goal is to have 6 months living expenses on hand in cash, at the minimum.   Spend Some: take 33% and buy something you need with Cash.  Credit Card purchases are a No No if you are not going to pay off your balance at the end of the month.  Invest some 33%.  Here’s where your decision making skills can be applied.  You can either invest it into your IRA, Roth IRA or your S&P 500 mutual fund.  If you don’t have any those, look into them and now is as good as a time as any.  There are plenty of resources at your disposal.  If you need a starting point, check out:   

Another idea is pay down some debt, like a credit card balance, if you have one, or put some extra into your mortgage principal.  Lowering your debt along with a savings and investment plans is excellent way to take control of your finances and future-self will appreciate it. Oh, and future-self, this is the person who you’ve become  from the past five or ten years.  Think about how far you’ve come up until this point.  So, do want to help your future self and enjoy the present?  Save Some, Spend Some, Invest Some.

Carry On.

Here are a few additonal resources right beneath your finger tips.  Like I mentioned in a previous post,  try and find mentors and bloggers that aligned with your values, goals, objectives and dreams. Have a scan through their sites and challenge yourself to learn one thing new every day.

Author: Francis

Started out in science and somehow ended up in sales & marketing. Grew into a results oriented sales professional with extensive experience selling and positioning scientific solutions in the pharma/biotech, life sciences and medical diagnostics markets. In 1998 I created an excel sheet to track spending and cash flow to learn personal finance on my own. They don't teach this in school and by the time one figures it out, most of let all these resources slip through our fingers. It's time to pay it forward to this next gen so that they can shave 15-20 years off for working for "the man" with insights, a library of tools, and motivation from me and plenty of other FI bloggers that I follow.

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