At Travis Air Force Base and military installations across the world will turn their attention to the financial education of service members as part of Military Saves Week, March 5-9. This annual event provides seminars, hands-on learning for youth and the involvement of financial institutions with close ties to the military, such as Travis Credit Union.
Among the topics discussed is the handling of tax refunds. Below are some common tax return savings strategy taught during Military Saves Week.
If you’re receiving a tax refund, you might be tempted to spend it on a new wardrobe, that big flat-screen TV, golf clubs or something else that’s not really a necessity. Instead, being financially responsible about how you spend your refund now will be a huge help in the months to come. One way to do this is to use the 30-40-30 plan to pay for your past, present and future.
Past: Designate 30% of your refund to paying off debt and catching up on outstanding bills.
Present: Earmark 40% for current use.
Future: Use 30% to jump start an emergency fund or longer term savings
Here are some tips to get you thinking wisely about how to spend your refund in 2018:
1. Use 30% of your refund to pay down debt. Using your refund to pay off high-interest debt such as credit cards is a responsible way to utilize the extra money. Paying off your debt could save you hundreds of dollars in interest over the life of the balance. This is a great way to maximize your refund dollars.
2. Put 30% of your refund in an emergency savings account. From car maintenance and home improvements to medical emergencies, an inconvenient event is bound to come up and you will want to be financially prepared. Military Saves recommends saving at least $500 for emergencies, so consider using part of your refund to open or add to your emergency savings account.
3. Be strategic. Create a monthly spending plan and write down how you will spend your tax refund throughout the year. If you divide the amount of money in your tax refund over 12 months, it won’t be as easy to splurge or spend your refund too quickly. Think of the new clothes you need for your growing toddler or teen, the braces your child may need or paying for summer camp. Being strategic about how you will spend your money will make it easier to do it in the future.
4. Start a ‘special occasion’ or holiday fund. How many times has Valentine’s Day, your anniversary or your parent or child’s birthday snuck up on you and you realize too late that you don’t have money to buy gifts? Set aside a portion of your tax refund for future special events.
5. Consider giving back. When you are working to make ends meet, the thought of putting money toward anything other than your own bills or savings account might be difficult. But think of the lesson it will teach your kids, and the feeling it will give you to donate $5-10 a month to a local food pantry or shelter. Not only will you will be helping your community, you will give yourself a tax write-off for the next year.
Making wise decisions on how you’ll spend your tax refund now will save you from potential financial headaches later. These steps will not only help you at tax season, but throughout the year. Learn more about saving at tax time.
Ready to start saving? You can open a savings account at Travis Credit Union online today! It only takes $5 to open an account and become a member of not just a financial institution, but a credit union that gives back to the community.
So open your account today online, visit traviscu.org/savings.