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What About My Refund?

Wealth Management Questions and Answers

Dear Lillian:

I have been told that I should spend my refund of $3,000 from the Federal and $1,000 from the State now because investing it or saving it won’t gain me much, if anything, in the future. John

Dear John:

Let us talk about why you are getting a refund. Was this forced savings?

If this was forced savings, you did not get any interest and you had to spend time doing your taxes or you paid someone to do them so you could get your money back. The government has control of your money. Inflation is also higher when you receive your refund in 2011 than it was when you gave it to the government in 2010. (The $4,000 will not buy as much goods in 2011 as it could have in 2010). You have already lost and you need to consider a different way to save. You shorted yourself $333.33 a month, you probably had to use your credit card for gas, food and misc. That cost money to use.
I regress.  You want to know what to do with your refund.

Should you qualify, investing your refund into a Traditional IRA (Individual Retirement Plan) or a Roth IRA is always a good start. In addition, look into life insurance might be a good way to invest your refund. Small steps are how we move forward. The younger you start the better.

Dos:
Do a new W-4 to estimate your taxes…
Make sure you know the purpose of your refund.
Consult an expert in wealth management or Taxation.

Don’ts
Say no, if you need the money to live.
Don’t get a big refund. Unless it is the only way, you can save.
Avoid investing without consulting a certified expert…

Have More Do’s & Don’ts questions? Send them to Lillian at  meyersfinancial.com