This year, one in two Americans receiving a tax refund say they plan to spend the extra money on bills or other household expenses, as opposed to vacations (15 percent), leisure activities (8 percent) or gifts (4 percent), according to our recent poll. The survey also noted that more than three-quarters (78 percent) of Americans receiving their refund will be “smarter” about how they spend it, with more than half (55 percent) pledging they are more likely to use refund dollars on practical “needs” instead of “wants.”
We have partnered with certified financial planner and savings expert Robert Pagliarini, author of The Other 8 Hours, Six-Day Financial Makeover, to offer additional tips on helping you stretch tight tax refund budgets.
- Set up an emergency fund – Stocking away six to twelve months of expenses can really help individuals and families who have found their home equity line of credit has been reduced -- or an unexpected medical fee arises. The everyday stress of life is less alarming when you have a healthy cash reserve to fall back on if you absolutely needed it.
- Open a 529 College Savings Plan – According to the National Center for Education Statistics, the cost of a college education continues to rise every year. Between 1999–2000 and 2009–10, prices for undergraduate tuition, room, and board at public institutions rose 37 percent, and prices at private institutions rose 25 percent, after adjustment for inflation. Planning early and setting aside money for college now is the most important thing you can do for your children’s collegiate success. Make saving money a priority and stress the importance from a young age.
- Seek out classes to boost budgeting skills – Taking a refresher course at a community college or neighborhood center can help boost financial planning skills that you currently have or help you learn a new one. Many colleges offer these types of classes for free or at a very low cost.
- Talk to Experts – seek out financial advisors, business bankers, and tax professionals (Many of which offer a free initial consultation) on how to save money, budget, or prepare for large purchases or even on how to save money in general. Take notes and ask friends who may be experts and email follow-up questions.
- Research the best deals on monthly expenses – There are expenses you will incur each month, such as food, transportation and cell phone costs, which are easy to re-evaluate and cut as long as you do the right research. For example, choosing a pre-paid wireless provider such as Cricket will help you save hundreds of dollars each year, without sacrificing all of the fun apps, games and music that your family can’t live without. Cricket has the latest devices with a no-contract plan that includes unlimited talk, text and data for less than half what you’d end up paying at a larger wireless provider.