Making Your Tax Refund Work For You

Knowing exactly what to do with your tax refund can be a little overwhelming. If you're in debt, you might feel guilty about putting it anywhere but towards the debt or you might feel justified to just go "blow it all".  Here are a few ideas that can help you make the most out of your tax refund without the guilt:1. Always have a little fun. You don't have to put 100% of your refund towards paying off debt. Set aside a little and designate it specifically for a fun activity.

2. If you don't have an emergency fund, this is a great way to put your tax refund to positive use. We recommend that you have at least $1000 in an emergency fund so if you're getting a lump sum refund, this is a great way to boost that quickly.

3. Never spend your whole refund all in one place. Not only will it make you feel better to have spread it around, it allows you to take care of multiple expenses whether they are debt obligations or things on your wish list.

4. Don't forget to put at least some of your refund towards debt. You don't need to use all of it (and shouldn't!) but paying down a portion with a lump sum refund can help you get to your goal faster and will give you instant relief after having done so.

For more information on how to effectively use your refund or other debt management strategies, I invite you to schedule a free 30 minute coaching call with me today.

Don't Wait Until the Last Minute

I have a sign in my office that reads: "The best preparation for the future is the present well-tended." Henry Ford. This statement seems to ring even truer when it comes to planning for our financial futures. We are approaching the tax deadline of April 15th, which means it's a good time to share a few good practices when it comes to filing taxes, planning for next year, and managing refunds.

1. Even though we're already a few months into 2014, it's not too late to plan for next year's tax season. There are several opportunities you can take advantage of that can save you money but beginning early is the key. Need an example? In Indiana, you can set aside money for your child's 529 Plan and get 20% back on your taxes. That kills 2 birds with one stone!! Planning for your child’s future and reducing your tax burden today. Even starting in April, you have a great opportunity for next year! If you don’t live in IN look for your state specific 529 plan and see what tax opportunities you might have.

2. Are you getting a large refund this year AND operating on a tight budget? Adjust your withholdings so that you have more money during your month to work with rather than waiting for it as a lump sum at tax time. Check out irs.gov and search for the withholding calculator. It will tell you what to change your exemptions to so you can break even.

3. Speaking of refunds... If you're getting a refund, be clear about what you're going to do with that money BEFORE spending it. Planning ahead can ensure that you make the most out of the extra dough. Creating a “tax refund budget” will keep you focused on your goals as well.

For more information on how to manage your refund, be sure to join us for our next post!

You Have Options!

You have options! Are you stuck in a financial rut and feel like there is no way out? Do you wonder how everyone else is making it? Here’s the deal. I know you make good money. You work hard. You have what you need and most of what you want but you are not getting ahead financially. What is the problem here?

For many people, seeing no way out holds them back from ever getting where they want to be. When I sit down and talk with my potential clients for the 1st time during our Debt-Free Breakthrough Session “I see OPTIONS!” And many times you have more options than you think. Here are a few for you to ponder…

1. Increasing your income with a side business or a part-time job. Yes I know this is uncomfortable and a time commitment but in the end it helps you get where you need to be faster. 2. Selling something. We all have more stuff than we need. Someone always needs something we have and now is the time to make that connection. Use craigslist.com, ebay.com, or just have a garage sale! More money in your pocket leads to more peace. 3. Does someone owe you money? The government is included in this question. If someone owes you money can you change the terms and increase their payments? Can you adjust your withholdings so you get more in your paycheck if you always get a refund? Why give the government a loan when you need the money right now? 4. Do you have a car payment? I know you are grumbling about this right now but car payments suck our futures away. When you are looking for ways to increase you income and decrease your outgo this is the perfect place. Sell your car and get one that you can pay cash for or have a payment for less than 1 year. This is a short-term sacrifice for a long-term gain. 5. Can you barter services to get things you need without paying financially? This concept is huge because you can get exactly what you want and need without it affecting your budget.

These are just a few of the options that I see regularly. You may not want to do any of them because they are painful, but I never said they were attractive. I just said they were options. Options prove that there is more than one way to get to your end goal. Now you must choose which one you will commit to and get to work. If you aren’t willing to CHOOSE then I would question… “How bad do you want it?”

If you would like me to consider your personal options book your complimentary Debt-Free Breakthrough Session NOW!

Plan ahead

Usually around October, November, or December companies give their employees the opportunity to change their benefits elections. Some of you may be in the middle of doing that right now like I am. I encourage you to take a closer look this year. Some things have changed across the board. Yes the cost of healthcare may be increasing for you like it does for many of us but look at what the needs of your family are as you make your elections. Next year my family will have lots of dental work. Yes we brush our teeth  but things do happen! So, now is the time to increase our dental plan so it covers a higher percentage of the work. In addition, we need to increase the amount we put into our flexible spending account. By the way, all flexible spending accounts will now have a limit of $2500. That account is funded tax free. So we don’t have to work as hard to spend that money.

Also, review your life insurance needs. Maybe your income has increased or your family dynamic has changed. It is always a good rule of thumb to have 8 to 10 times your income in life insurance if someone else depends on your income. Purchasing life insurance through your employer is always the least expensive avenue to take. It literally costs pennies to go from 1X to 2X your income in most cases.

Finally, take an overall assessment of your household’s medical needs. You may want to calculate the amount of prescriptions, doctor visits, and preventive care your family needs next year and plan for it. Use a flexible spending account that avoids taxes or set up a health savings account if your company provides it. Otherwise, set up your own account for medical expenses so you always have a way to take care of your health. You can do the same for any dependent care spending. Your company may provide a tax free dependent care account up to $5000 so take advantage of that savings as well.

Your health is vital so you must take health care seriously. No matter what happens in the White House, I encourage you to do what is in your control to stay in your best health possible. Ultimately, remaining healthy affects your budget for life…

Refund or Not?

It’s tax season! You have 1 week to complete your taxes if you haven’t done so already.  Some people love tax season because they know a refund is in their future.  Others are dreading it because they always owe.  The best way to successfully maneuver through tax time is to have a plan.  Here are some suggestions whether you face either scenario. Let’s talk worst case scenario first.  If you owe the government here are some things you can do to recover well…

  • If you don’t have all of the money right now, the government does take payments.  So don’t be afraid to file if that is the case.  Just be honest about what your budget says you can afford and do your best to pay it off by April of 2013.  We don’t want this to linger very long.
  • Estimate your withholdings with the “withholding calculator” at www.irs.gov. Then go to your payroll department and change your exemptions so enough money is getting taken out of each check.  It is best to plan ahead than find out you will owe again!
  • Review your budget.  Make adjustments to your budget because now you need to live on less.  Find out what is unnecessary and reduce it or cut it out entirely.  Be sure your budget balances with the change in exemptions and/or your monthly payment to Uncle Sam.

If you always get a refund here are some suggestions to make the most of your money…

  • Put some money in savings!  If you don’t have $1,000 in savings then you need to make that 1st on your list of to dos.
  • Pay off some debt!  List your debts smallest balance to largest balance and see how many you can pay off within your refund amount.
  • Set aside money for any upcoming expenses (car repairs, non-monthly bills, etc).
  • Have some fun!  Yes I said it!  Go out to dinner, take your kids to the museum, or buy something pretty for your home.  Of course, I don’t want you to spend all of the refund on fun but a little fun makes you feel like you got something extra.
  • The best way to handle a refund though is to actually get it in your paycheck throughout the year.  If you received $2,400 from the government, I think it is better to get $200 more each month instead.  Go to www.irs.gov and estimate your withholdings with the “withholding calculator”. Then change your exemptions with your payroll department so you just break even.  Imagine having more money each month to pay down debt, save, or simply have fun!

Whether you have a refund or not I hope these tips will help you to be a better steward over your taxes this season.  Making smart decisions with your taxes can have a positive impact on your future.