We’ve all heard financial experts give advice on what to do with that big tax refund check this year and how to get the most out of it. Rarely though, do we hear about what NOT to do with those checks.
Investment adviser Daniel Fisher of Northbrook firm Fisher Financial Group, LLC 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 that refund burn a hole in your pocket, here are some things to consider:
- 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.
Daniel Fisher, a Registered Financial Consultant (RFC) and registered investment advisor who holds a bachelor’s degree in business and taxation, has been assisting individuals and corporations for 32 years.
His expertise includes clients in the federal government, local school districts, and major companies such as AT&T, Motorola, United Airlines, and American Airlines.
Fisher has written a number of articles and has been a featured guest speaker on Fox 32 Chicago TV as “Dan the Money Man” and on America’s Wealth Management Show with Dean Barber on WIND 560 AM radio.