We’ve all heard Northbrook financial advisors give us advice on what to do with that big tax refund check this year and how to get the most out of it. But, what about the other side of the coin, which is what NOT to do with your tax refund check.
Dan says when you’re expecting a tax refund and treat it like “free or found money” it can make you do unexpected things. But before you let your tax refund burn a hole in your pocket, here are some things you should NOT do with it:
- Don’t count on it.
First things first, the important thing you shouldn’t do with your refund is count on it. If you are waiting for your refund to arrive to pay rent or your bills, you can end up in trouble.
- Don’t think of it as free money.
Getting a tax refund seems like a bonus or winning a tiny jackpot. But keep that it is money you worked for and earned. So this money isn’t necessarily fun, free money.
- Don’t spend money on expensive activities.
Tax season is stressful, and you can easily be tempted to go out and do something fun to blow off some steam with your tax refund. But just because you want to do something fun, does not mean you have to spend your refund.
- Don’t book an overpriced vacation.
With a combination of winter blues and stress from taxes, don’t use your entire refund check to go on a pricey vacation, remember there are plenty of ways to save on a vacation.
- Don’t splurge on an expensive dinner.
You get your refund check, look at your spouse, and say, “hey, let’s treat ourselves to a nice steak.” It’s not that you both don’t deserve it, but it is probably not the best thing to do with that money. You can still go out to a nice dinner without it costing you a whole week or even month’s food budget.
- Don’t Buy things you don’t need – Funny how a little cash in your pocket makes you realize you absolutely must have the latest (fill in the blank). If you didn’t need it before you received your refund, you probably don’t need it now. Remember your income tax refund is just that, a refund of your money which you overpaid to the IRS. It isn’t cash the IRS just had laying around to give away. If you wouldn’t have paid for the much needed item out of your paycheck, don’t use your refund for it either.
- Don’t Become a lender – Unless you are considering a legitimate peer-to-peer lending program, don’t get suckered into becoming a bank for someone else.
Dan started his career as an accountant and moved into advising individuals on growing and preserving their assets conservatively while paying the least amount in income taxes. Daniel is a Registered Financial Consultant (RFC) and a Registered Investment Advisor with his firm Fisher Financial Group, LLC. He holds a Bachelor’s Degree in Business and Taxation from Roosevelt University. Feel free to call him at (847)205-9300.