Some people have a lot of trouble saving money and getting out of debt. If you fall into that category, you are not alone. Millions of Americans fall in the same category, and many are just trying to figure out how to make our situation better. There’s a lot to learn as you start to create budgets, learn to manage finances, generate better spending habits, and save money. While it seems overwhelming, there are many ways you can build a better financial position. One way is to reward yourself with windfalls and tax refunds. If you are getting a windfall or receive a tax refund at the end of the year, this is for you.
What Is A Windfall?
A windfall is a large lump sum of money you get for various reasons. A windfall could be an inheritance, bonus check, settlement funds, or any unexpected large sum of money. An undisciplined person may take that money and live life lavishly. I know a few friends waiting on windfall they have designated for travel funds even though they don’t have an emergency fund. I’m not saying anything is wrong with that, but there’s a better way to put that money to use. Sure, take a little bit of a reward yourself with a vacation or something nice, but put the rest of it away. Windfalls are money that you are not depending on for survival. They are extra.
Tax Refunds
Tax refund checks are a little bit different. Most of the time, you know whether or not you’re going to get one before you file. It is something that is expected, and often people have already predetermined what they will use the money for. While some people have good intentions, those with bad financial literacy often use that money towards things they do not need, can’t afford regularly, or provide no benefit to their lives other than monetary value. I know several people who use their refund checks to purchase new cars that are way over their budget, travel, and shop.
Instead of spending frivolously, spend with intent. If you’re getting child tax credit money back, go ahead and put that money aside for your child. You can do that by starting an education investment fund or savings account. Also, designate that money towards your child’s expenses including clothing and extracurricular activities. You can also allocate that money towards your savings accounts, health expenses, and investment opportunities as well. Allow this money to generate a better financial future for yourself and your children.
How Can You Manage The Money?
When it comes to allocating that money properly, your going to do a little work. Look at all your expenses, debts, and your child’s expenses. Calculate how much you spend in each category as well as how much you would like to save. Earmark a percentage of your windfall or tax refund to pay off one to two of your debts. Then move on to your children’s needs. If they have recurring monthly expenses, take care of them. If not, or you want to do something else, save and invest for them. You can do so by opening up a high-yield savings account, a custodial investment account, or an education investment account. Allocate a certain percentage directly into funding such an account. Lastly, help yourself.
Millions of Americans are not good with their money, but there are ways to circumvent that problem. Reward yourself with windfalls and tax refunds by allocating those funds towards debts, investments, and educational accounts for you and your children.
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