Use Your Tax Refund to Build Financial Health
If you have a hard time saving, don’t be alarmed—it’s difficult for most people. According to USA Today, almost 55 million Americans do not have an emergency savings fund. In an unstable world, the best way to provide stability for yourself and family is to set aside money for a rainy day. We all know this, but the biggest challenge to building savings may be because it’s easy to trade what you want most for what you want right now.
This tax season, here’s an idea to improve your financial health: establish an emergency savings account by using your tax refund. Unfortunately, tax preparation is complicated and when preparing your own taxes, you may miss a tax credit or two. Using a certified prepared who knows how to maximize your refund is key to making sure you are getting all the credits you qualify for.
The Volunteer Income Tax Assistance (VITA) program provides free tax preparation services for low- to moderate- income households. IRS-certified volunteers prepare and file both federal and state returns for free, making sure to get each taxpayer all the credits they qualify for.
Then once you maximize your refund amount, save it! The psychology of saving is tricky. Set up a separate savings account for your refund and keep the cash liquid; that means don’t tie it up in any type of investment that will penalize you when you pull it out. Then continue to feed that account monthly. Pay your savings account just like you do all of your other bills. If you set your account to make the payment automatically, it can be easier to get in the habit.
I don’t have a crystal ball, but most people face unforeseen difficulties and bills at some point. You may have car troubles or medical bills in the next year. Why not be prepared for them? The key is don’t give up! With practice, you will learn to save.