We have all been trying to save during this pandemic, so how should we view our tax refund? Spend or save it?
WEST PALM BEACH, FL – Over the past year during the Coronavirus pandemic, saving has been one of the top priorities and necessities for millions of Americans. With many states beginning to open back up, we are faced with a very difficult choice. Do we save or spend our tax refunds?
The idea of enjoying being out in the community and going to dinner or brunch with friends is an immediate temptation. Maybe you want to travel or go to a theme park or whatever else you have missed out on since last March. While I understand this desire, Americans should be very cautious with how they utilize their refunds.
Of course, do something that allows you to feel a return to normalcy, but don’t be wasteful. If you want to allocate your refund towards anything, below are a few suggestions that will benefit you long-term. We will get on what not to do after that.
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- 1) SPEND YOUR MONEY LOCALLY: Amazon and other online ordering services have helped us get through the lockdowns. However, your local business owners need your help now more than ever. Many did not make it through this pandemic… and those that have need the support of their local communities. From the hardware store to local eateries, stop and think about where you can get your goods and services locally before continuing to throw money at large corporations that have made a killing. The more vibrant and secure your local business owners are, the more community value and job opportunities become available to you and your family.
- 2) CAR: What do you need to do with your current method of transportation that can help extend its life? Car manufacturers have had record low sales and news reports have indicated that getting into a new car today is a more costly endeavor than in recent memory. It might feel good to get something new and a fresh start, but we do not know how quickly some states will reopen and how long they will stay that way depending on pressure from the CDC or the politics of the pandemic. That means your job could be at risk, hours could be cut, etc. -the last position you would want to be in! Using your tax refund for a down payment and increased monthly expense or a lease or a car loan that puts you on the hook for several years! Work smart and you won’t have to work hard to pay for fixed monthly expenses like this in an uncertain economy where everyone’s job security is at risk.
- 3) HOME: Home prices are at an all-time high, but the market is also flooded with listings. Depending on the real estate market in your local area, it might be wise to consider home repairs that could help your property stand out, if you are looking to sell your home. If not, same rules apply as we discussed with your car. Do a walk through at home and see what can be fixed without having to purchase new appliances or commit to costly home maintenance so you can spend your return across several different areas instead of spending it all in one place.
- 4) CREDIT CARD DEBT: Did you run up some of your cards to make ends meet? Evaluating your current credit card debt and attempting to pay some of those accounts down is always a good idea, especially when you come into some cash that is not a monthly income stream like a tax return or bonus.
- 5) GO BACK TO SCHOOL: Most colleges or universities are still completely online, and more tailored to letting you truly operate at your own pace. Do what you can to secure scholarships first and foremost. If you are financially sound and can’t qualify for financial assistance, the economy created by the pandemic, that won’t likely go away for the foreseeable future, has created a whole new job sector that requires new skills or talents. Trade schools or other forms of education and skill-building should also be an option.
And for those who don’t see a reason to spend their tax return, saving is always an option. Be sure to speak with your financial advisor about the best place to store your return. It might be an investment in some stock or into your IRA. Have kids? Park your return in a college fund.
At the end of the day, the choice is ultimately yours and these are broad and basic recommendations. Call a family meeting and find out what makes most sense for you and yours.