Saturday, February 4, 2012

The Irk List - Tax Returns

Every year about this time, the commercials turn to Refund Anticipation Loans, jewelers and car companies offering to loan you money based on your W-2 and anticipated refund, etc. This reminds me of the tax return mindset that drives me ape crazy.

So, here's the hard news: Your tax refund is NOT found money, like winning the lottery, or stumbling across the rest of D.B. Cooper's loot on a beach. It is money that you overpaid our government throughout the year.

Now, I hear you - you likely wouldn't have saved it had you had it weekly. I get that. There are those that have less self-restraint than others. If you recognize that you need this kind of structure to save, more power to you.

So, here's the rub. When I hear Doris mention how she and Bubba are going to Cozumel with their tax return, I nearly stroke out. If Bubba and Doris can only get to Cozumel via tax return, that's a clear indication that they need to direct the money in a better way for their future security. Sucks, I know.

We should indignantly rip that interest-less refund out of the IRS' hands as though they were pickpockets. We should then bring in some Jean Chatzky-like guidelines and decide how it can be best utilized.
  • Do you have credit card debt?  Throw the refund at this immediately - this stuff is evil.
  • Do you have the ample cash-on-hand padding to solve for unemployment, or other unexpected life events? (ranging from a broken washer to Fido needing life-saving surgery)  If you have no credit card debt, this is the second gap to fill. I believe the guideline in this economy is 6-8 months of salary in cash.
  • Do you have adequate savings toward retirement? No one's going to do it for us, so if you aren't tracking at an adequate rate, you'll be working until you're 90.  This is the third gap - throw the return into an IRA.
I get that none of this is fun.  Vacations, new furniture, a new car or other types of more fun items should be a part of a short-term saving plan, as opposed to the long-term savings for retirement. 

If you totally disagree with me and think I'm just a big buzz-kill, that's your business. But, please; when you and Bubba are waving goodbye from the side of the Carnival cruise, just don't tell me.  Ignorance is bliss.

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