Making your Tax Refund Spending Plan Work for You

Now that you have your spending plan made for your taxes, you are ready to learn a couple simple tips for making this plan work for you.  For many people it is hard not to go out and spend just a little bit here and then a little bit here ….. finally totaling up to “where did all that money go”.  Small amounts add up quickly.  Very quickly.

The best way I have found to keep the plan in front of me is to write out on an index card what the money will be spent on.  Write down each item and the amount you have given each one.  When the money comes in, place it in an account not often used.  This will keep it from being “mixed up” with other money.  It will also keep you from thinking you have more money to spend this week than you actually have.  Remember, this tax money is already spent, on paper anyways.

As you purchase or pay for the items in your spending plan, transfer or get the cash out for the exact amount of those items only.  Keep in mind to cross those item(s) off the spending plan.  Now when you add up the items left on your plan, it should equal or be greater than the amount in the account.  If an item does not cost as much as originally figured you can always apply the extra to a debt or add it to your savings.

Remember that the key to making any spending plan work for you is to tell your money where to go, what to do and when to do it.  You must be in control of your money.  You must plan before you get the money or at least before you ever cash the check.

I want to show you what I have on my Tax Refund Spending Plan:

Total of refunds                                        $ 6205

Leftover Funeral Expenses  350
Prom/Senior Expenses  500
TV/Streaming device  500
Vision Expenses  350
Savings  4505

Notice that I stayed within the 5-10% range for an item our family really wanted.  I think it is important to include this item in your plan.  It is like a reward for the hard work and willpower it takes to follow the plan.

How will you spend your tax return?  Do you have a written plan for it?  

Making a habit out of living frugal …..

***Please remember I am not a financial expert or professional.  I post about what has worked for me and what I have learned from research and helping others.  I cannot be held responsible for any ideas expressed here.  You are to plan, read, follow at your own risk.  For more read my disclosure/privacy policy.

Making a Spending Plan for Your Tax Return

Last week I talked about making a spending plan for your tax refund.  A little planning can help you make the most of your money.  It can also help prevent a person from spending more money than the actual refund.  We have all heard the stories about lottery winners ending up going bankrupt.  Why?  They didn’t plan.  They just started spending and when they stopped, they had spent more than they had received.

Before you can create a tax refund spending plan, you need to have your taxes complete and ready to file or filed and awaiting your check or deposit.

The most important thing to remember is to never spend any money before you receive your refund.  Do not charge either on plastic, layaway or anyway with the intent on paying it off or finishing the payments when you get the money.  Life happens every day and you may not get your money when you expect it or it may not be as much as you planned.  So many things can go wrong.

On the top of a piece of paper write the total amount of your tax refunds.  Now turn this piece of paper over and let’s start our plan:

  • The first part of our tax refund spending plan will be to determine any needs we might have that don’t fit in our monthly budget.  Does your car need new tires or another repair?  Do you need new glasses?  Could you use a small freezer to store food?  Write these items down on the paper with the amount next to them.  This list should only include items that are important needs.  A new TV does not count unless you make a living watching TV.
  • The next part of our spending plan is to list any bills you may be delinquent on.  Include on the list the amount you are behind.  If your bills are all current you may move on to the next step.
  • After listing delinquent bills, list any bills or accounts with balance due of less than $200.  List the account name and the balance due.
  • Do you have an emergency fund?  If you answered no, add emergency fund to the list.
  • Do you have any items that you have been wanting?  Make a list of these items with the cost next to them.  Now I want you to prioritize the list.  If you could only get one item, which would it be?

Now you are going spend the money on paper.  You need to account for every dollar of that refund coming in.  Start working with the items you listed on the back of the sheet and work out a spending plan.  Subtract items from the refund total until you get to 0.  You may have to do this more than once to get the plan the way you want it.  Include one item from your wants list.  This item should not exceed 5-10% of your refund amount.  Many people recommend way less than this amount but I give our family 5-10%.  It’s somewhat of a reward for creating and sticking with the spending plan.

Coming up next Sunday:  Making your Tax Refund Spending Plan Work for You

What’s on your tax refund spending plan?  Have and questions?  How do you spend your tax return?  Leave a comment letting us know?

Making a habit out of living frugal …..

 

***Please remember I am not a financial expert or professional.  I post about what has worked for me and what I have learned from research and helping others.  I cannot be held responsible for any ideas expressed here.  You are to plan, read, follow at your own risk.  For more read my disclosure/privacy policy.

 

Expecting a tax refund?

If you received an income tax refund in 2011, you were among the 109,337,000 refunds issued by the IRS by December 31, 2011.  That is approximately 35% of the U.S. population.  According to the IRS website, the average of those refunds was $2913.00, down 3% from the previous years returns.

If you received a refund check for $2913 today, what would you do with it?  Would you cash the check and use it here and there until it was gone?  Would you have it direct deposited into your checking account to be at the mercy of your debit card?  Would you make a written plan for that money before you cash the check or add in the deposit?

Studies have shown that American’s spend found money (winnings, bonuses, tax returns, etc) much differently than earned money.  Found money is generally not used by the average consumer to pay down debt, make payments, fund savings accounts or retirement, but instead is used for items purchased on a whim.

With the cost of goods continuing the upward trend, consumers are being more frugal than ever.  People that have never used coupons are taking up clipping.  More people are frequenting thrift shops and yard sales.  Consumers are trying to hold onto their money longer, but will they hold onto their tax refund?

If you are expecting a tax refund, consider making a spending plan before that deposit makes your debit card antsy or before that cash starts burning a hole in your wallet. Spending a little time planning could help you make the most out of that found money.

Coming up next Sunday:  Making The Spending Plan for Your Tax Return

 

How do you spend your tax return?  Do you make a plan?  Any questions or comments?

 

Making a habit out of living frugal …..

 

***Please remember I am not a financial expert or professional.  I post about what has worked for me and what I have learned from research and helping others.  I cannot be held responsible for any ideas expressed here.  You are to plan, read, follow at your own risk.  For more read my disclosure/privacy policy.