Amanda Peterson
April 5, 2023
• 1 Minute Read
I'm sure you, like most people, have BIG plans for that tax return you might be receiving this year. After all, it's time to catch up on bills, and maybe buy that new sectional or kitchen table you've been looking at for a while. Well, we're here to say don't. If you're one that is always living paycheck to paycheck, maybe it's time to dump that extra cash into a saving account. CreditSoup's Wise Spend Wednesday tip this week is to not spend your tax return. Save it instead!
Why Save My Return?
In short - life happens. And with the uncertainty of the economy today, you never know when you will need some funds to fall back on. As you may recall, we highlighted the benefits of having a savings account in a previous article. To summarize, you may be subject to job loss, car troubles, or unexpected health problems to name a few. Stashing that extra money in a savings account will help alleviate potential stress that you may incur with such downfalls.
When Can I Spend It?
Once you've built your savings account to have at least 3 months worth of income, the rest is up to you on what you want to spend it on. Having 3 months worth of paychecks saved gives you something to fall back on in the event of a job loss. In some circumstances, if you're laid off, you may be given a severance. If that's the case, put that into your savings as well, and immediately get on the hunt for a new job. If you're lucky & land a job within the first week that you're unemployed, you now have double income for the month. Saving that will help build the account too, and then you're on track to make that BIG purchase that you've been wanting.
What We Have Learned
Speaking from personal experience, I went three years without spending a dime of my return. It built my savings account up and I was able to finally make those long desired furniture purchases for my house. And, I didn't have to finance any of it. Saving my tax return also allowed a bit of a cash cushion and less stress in the event of job loss.
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