What to do with your tax return

Local financial professional Dale McCarty from retirement designers financial group is here to talk about how *not* to spend your tax refund.

Q: what are some of the worst ways we can use our tax refund?

Spend it
• people often think of a tax refund as a bonus or a gift, but that's really not the case.
• your tax refund is your own money- you worked hard for it and it was withheld from your paycheck. The government is simply giving it back to you.
• retailers know people treat their tax refunds differently, which is why we start seeing ads for tax refund specials on everything from furniture to cars to tattoos!
• avoid the temptation to go on a spending spree; buying more stuff will not benefit you and your finances in the long-term.
• you can also find yourself deeper in debt if you overspend.

Lend it
• lending your money is one of the worst things you can do with a tax refund.
• make it a policy to turn down friends and family asking for money.
• you don't always have to say "no." try saying "it's not in my budget" or "I have a strict anti-lending policy."
• it may sound harsh, but lending money can cause problems in the relationship and can put you in a tough spot financially.

Depend on it
• if you're waiting on baited breath for your tax refund each spring, consider changing your withholding to benefit your finances year-round.
• you won't get as big of a refund next year, but you will get more in each paycheck throughout the year.
• you can make changes at any time by going to your payroll office and filling out a new w-4.
• ideally, you want to have just enough withheld so that the amount will come as close as possible to your actual tax liability for the year.
• the IRS has a calculator to help you figure it out. You can check it out on my website, retirementdesignersfg.com

Q: What should we be doing with our tax refund?

Reduce debt
• Americans now owe more than $1 trillion in credit card debt!
• I would love to see everyone who has debt put their tax refund toward paying it down.
• your priority should be high-interest debt, like credit card debt.
• but you can also use your refund to make an additional payment on your mortgage, auto loans or student loans.
• the quicker you can pay off debt, the better your financial picture will look.

Increase savings
• Americans need to get better at saving, and a tax refund is a good place to start.
• a recent survey shows that 69% of Americans have less than $1,000 in their savings account and 34% of people have no savings account at all.
• you can use your refund to start to add to an emergency fund, which should equal 3-6 months of income.
• you could also start a vacation fund or a holiday gift fund. Or your refund could be used to boost a kid's college fund or your own retirement savings.