Kathy’s Corner: Helpful tips to save, not spend, that future tax refund
It may be only January, but due to increased availability of electronic W-2 statements and other tax forms, many are already getting ready to submit their annual income tax return. Not only are many preparing to send in their return, they are also considering how they plan to spend their pending tax refund—considered “free money” by more than a few naïve taxpayers. However, this mindset could stymie an opportunity to save for the future and get you started (or help you continue) being a savvy saver.
The America Saves campaign, whose motto is “Start Small. Think Big.” Is dedicated to helping the average consumer become more skilled in handling their available finances; to get out of debt; and take steps to prepare for a secure financial future. Their website, https://americasaves.org/for-savers/ includes a series of articles and resources. Addressed here are a few tips from “54 Ways to Save Money.”
Build an emergency fund. This is perhaps the worthiest goal of all savers. Whether you are between jobs, laid off, the car breaks down or you experience an unexpected medical expense, having even $500 in a savings account can help cover an unexpected emergency expense. This should be deposited in an account that you don’t have easy access to. Ideally, you will add to the account on a regular basis until you reach an amount that will sustain you and your family for up to six months.
Save automatically. Setting up an automatic withdrawal from each paycheck to be deposited into your savings account is the easiest and most effective way to save. Discuss your intentions openly with your significant other or a close friend. This will help you become more inclined to follow through. If you are currently on a very tight budget, start small- say, $10 per paycheck. However, would your family budget miss $50 or more every month?
After you reach your goal of establishing the emergency fund, or perhaps at the same time, save for a more short-term goal: a new refrigerator, a family vacation, or another concrete reward.
Save your windfalls and tax refunds. Every time you receive a windfall, such as a work bonus or tax refund, put a portion into your savings account. Even if you don’t know what that amount may be (it may be zero), plan on a certain dollar amount or percentage you will save for your future. Post it, share your plan, and then follow through.
Save your loose change. Piggy banks are not just for kids! If you don’t already have a piggy bank, jar, or some other container to deposit loose change, you are missing out on an opportunity to painlessly save. More than one family has purchased a new trampoline, television or gaming system, or gone on vacation using this method.
Use the 24 hour rule. This rule helps avoid purchasing expensive or unnecessary items on impulse. Think over each non-essential purchase for at least 24 hours. This is particularly easy to do while shopping on line. Instead of making a purchase out-right; especially if you think you can find a better deal on another site, simply add it to your shopping cart overnight. If you still feel it is the purchase you both need and want, you can go back to it the next day to complete the transaction.
Calculate purchases by hours worked instead of cost. This tip is especially effective for those who work part-time or are hourly employees. Take the amount of the item you’re considering purchasing and divide it by your hourly wage. If it is a $50 pair of shoes or a $75 pair of designer jeans and you work for $10.00 per hour, is it really worth working one or more shifts for free so you can make this purchase?
If none of these tips appeal to you, please visit the website above for more ways to save. The tips are not intended to take away your enjoyment, rather help you have sufficient funds to take away financial worry and insecurity. Remember the motto of America Saves begins with “Start Small.” Begin with one or two of the most achievable tips. Starting now will better prepare you to be wise when that check comes from the IRS.
Kathleen Riggs is the Utah State University Extension Professor for Iron County. Questions or comments may be sent to email@example.com or call 435-586-8132.