Why You Should Save – Not Spend – Your Tax Refund
We’ve just survived the most popular season for advertisers and marketers, but as we enter a new year, the next big spending push is lurking around the corner: tax refund season. Quite a few businesses, both local and online, will be vying for your refund dollars this year. Here’s why you should tune them all out and put that money into your savings account instead.
Your tax refund is not free money or a bonus – it means that you overpaid the government in taxes the previous year.
Many financial advisors and money gurus, like Dave Ramsey, go as far as to say that you should not receive a tax refund at all. This is because, they argue, you could have been saving, investing, and loaning the extra money that the government has been taking out of your paycheck all year, instead of getting it back in one lump payment. It is like you are giving a loan to the government… but not getting any interest!
You can use your tax refund to get ahead with your finances… rather than just giving you a “feeling” of getting ahead.
During tax refund season, many people fall for the trap of spending hundreds of dollars of their hard-earned money on purchases that do not contribute to their financial well-being. If your car is on its last legs and you need it to get to work, investing your tax refund in the downpayment for a new vehicle (with affordable monthly payments!) is not irresponsible. But many people see the big numbers in their account and allow the car salesman to talk them into a sleek new car that is excessive for their needs and their regular budget. The exciting new purchase quickly turns into an unhappy obligation when the tax refund money runs out.
This season, be careful to evaluate if a tax refund purchase is truly a good investment (like a downpayment on a modest car or a new furnace) or if it only feels like one (like a new gadget, an expensive spa treatment, or a new designer purse).
Even if your Social Security Disability Insurance claim is approved quickly – you will need a Rainy Day fund for the first 6 months.
Most claimants are surprised to find out that Social Security Disability Insurance benefits will not begin until 5 full months from the date their disability began. This means, at the very minimum, if you become unable to work and your claim is approved right away, your Social Security disability insurance benefits still take 6 months to get started. Supplemental Security Income (SSI) benefits can begin sooner if you meet the nonmedical criteria. This article explains the difference between SSI and SSDI.
You should have a “Rainy Day” fund you can tap if you are hurt or ill and have to apply for Social Security disability benefits. According to NerdWallet, a good rule of thumb is to have enough to cover three to six months’ worth of living expenses.
Joni Beth Bailey is a Southern Illinois Social Security Disability representative.