Why You Should Save on Your Tax Refund This Year
When it comes to tax refunds, the standard financial advice comes down to this: “Either keep the refund, or use it to pay off the debt.” (Yes, I know a lot of people use their tax refunds to cover other big financial goals, from vacations to home renovations; I’m just telling you what a typical financial advisor might recommend.)
Another financial tip worth thinking about this year is whether it is worth saving tax refunds to cover the cost of the coronavirus.
As Michelle Singletari explains in the Washington Post :
Several thousand dollars in tax refunds can take a long time to pay some bills if your income drops due to illness or quarantine. If schools are closed but still need to go to the office, you can use cash to pay for day care.
I’m not trying to scare you, but you have to ask: how will I cope if my employer decides to take leave and force me to take unpaid leave? What if I run out of paid sick leave?
Singletary advises readers to refrain from tax-refund “fun buys” for now, and even suggests not investing that much of the refund on debt. Why? Because if you are in a situation where you are no longer making that much income, you can put groceries on your credit card, but you will need cash to pay the rent.
And for many of us, tax refunds are one of the largest cash receipts we receive in a year. So ask yourself if it’s better to keep this money in reserve until we know a little more about what will happen to the coronavirus and how it will affect both the economy and your personal life.