It's that time of year again to receive your tax refund.
Some people call it, "Black folks' Christmas."
It's the time of the year that people are trying to buy and sell social security numbers.
That's right, it's tax refund season. You see all the commercials, hear all the tax companies trying to say they'll get you the biggest refund ever, blah, blah, blah.
But the better question is, what are you supposed to do with that refund? If you do get a refund, it's widely known that a dollar in the African American community doesn't stay around for a long time.
So, with a windfall of money with your tax refund, many of us start to change our situation IF we change our mindset. So here's what NOT to do.
Do NOT:
1. Get a new car with your tax refund.
Income tax returns often mean automobile upgrades.
But if the current one was still running fine, why upgrade and get into debt?! If you must buy a car for something important like your job, then buy it cash.
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Do not have a car note (I repeat, DO NOT have a car note). If you finance the car, then you are setting yourself up to be right back in the same place that you were before you had this mountain of cash. Trust me, I've done it!
Many of you wonder what kind of car you can get with just a couple of thousands of dollars--one that's paid for! There is an old saying that goes, "the best kind of car is one that's paid for."
So don't go into more debt trying to buy a fancy car to impress people who don't even matter.
2. Put the check directly into a checking account “for safekeeping.”
This idea started out heading in the right direction, but by putting it in the checking account, it not only does not earn interest, but you put it directly in harm's way: yours!
Because it's easily accessible, over time it slowly will be spent on all kinds of unnecessary things until it's gone. Instead, put it in your credit union, savings, invest it in a mutual fund or money market accounts.
3. Loan your tax refund to family members.
When we have more money, many of us tend to feel more generous.
But at the same time, old habits are hard to break. So if someone in your family still owes you $20 bucks and now they want you to loan them $150 until next payday, you may want to rethink that.
The best rule of thumb when lending money to a family is don't do it. Give the amount of money you can handle as a gift instead. That way you're not expecting it back.
4. Buy new outfits.
We see this time and time again.
As soon as we get a little money, we go out and buy some clothes so that it LOOKS like we got a little money, but then there's no money in the bank, (shaking my head).
Instead of buying that outfit that you had your eye on for a while, do an inventory of your closet: do you really need a new pair of shoes or does your credit card is paid off sound better?
5. Pass down bad spending habits to others.
Listen, if you have a family, don't share your bad financial habits with them.
Once you get a refund check, think before you spend it.
One good spending rule to live is this: if you want it, give it 72 hours.
If you still want it after three days of thinking about it and the consequences surrounding it, then it should be open for you to purchase it. If there is any doubt in making the purchase, don't buy it.
That's just the little angel on your shoulder trying to steer you in the right direction.
Also, get your savings in order! Here's a quick guide:
●If you earn between $30,000 to $40,000: Save at least $1,000 in your life-happens fund and two months of living expenses. Push yourself financially.
●If you earn between $50,000 to $75,000: Save at least $2,000 in your life-happens fund. For now, it’s okay if you’re able to only get to three months of living expenses.
●If you earn between $75,000 or more: Your life-happens fund could reach $3,000 or more. And go for four to six months of living expenses in an emergency fund.
