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Wednesday, October 22, 2014

Elizabeth Street

UNLESS YOU'VE GOT A MILLION BUCKS IN THE BANK, SAVE YOUR TAX REFUND

Mar 20, 2014

Unless You've Got a Million Bucks in the Bank, Save Your Tax Refund

Looking forward to that tax refund? Been planning your spending strategy? Not. So. Fast. While you might be feeling psyched about getting some cash back from good ol' Uncle Sam, that's money that should go straight in the bank, or better yet, in an IRA or retirement fund that typically earns a lot more interest than a regular savings account. 

We spoke with Joey Bencivenga, a long-time CPA in New York City, who told us that unless you're sitting pretty on a million bucks that's off earning interest somewhere, spending your tax refund is just foolish. "Why would you spend it?" he asked in total seriousness. He continued: "Most people struggle with saving; we should be doing as much saving as we can."

OK, so no new spring wardrobe, but what about paying down credit card debt? Digging yourself out of credit card debt can be challenging, and putting a tax refund towards lowering the balance isn't a terrible idea. Student loans, on the other hand, as money guru Suze Orman says, are good debt and, therefore, nothing to lose a lot of sleep over. 

Although Bencivenga's advice might fall on reluctant ears, it is sound. The earlier you start saving, the better, especially if you've got a family to consider. And Forbes agrees. The financial magazine breaks down the three basics of a solid financial foundation like this: "Credit card debt paid off. Emergency fund stocked up. Retirement account(s) in existence and growing. Everything else (travel, homeownership, investments) should come after. "

So while it can be tempting to pack the crew up and take a much-needed vacation, it's definitely not in anyone's best financial interest. If you want to take a family trip, figure out your budget, and go from there, but don't blow a bunch of money hastily. You'll only regret it later on when you wish you had a stash for emergencies.

For some basic money-saving tips, click through the slideshow above.

By Stacey Gawronski

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