How to Spend your Tax Refund? Don’t!

Tax Day is April 15th

It comes every year and with it, our Facebook feeds, Twitter and Instagram accounts are full with everyone updating and showing off friends & family playing with the new “toys” they got with their tax refund!

person holding black pen

Some people get a new car every year, or go on a family vacation, or go to an extravagant dinner they couldn’t have otherwise afforded.

For many families, tax season is the best time of year. Soon, they’re taking pictures of the latest Disney vacation, or the latest piece of technology they purchased. What does all this have in common? People are spending when they should probably be saving.

Let’s be real. Saving just isn’t as fun as spending but what if I told you that saving your tax return each year sets you up for opportunities to have more spending money throughout the year? Would you be interested in hearing more?

It’s true that a little delayed satisfaction can go a long way here. Let’s take for example, a family of four and a $1,500 tax refund.  Believe it or not, that amount is modest by some standards.

This $1,500 could provide

• a nice vacation for a family of four including hotel lodgings, fun and meals, OR
• an action packed staycation at local attractions, museums & theme parks OR
• an elegant night on the town (or two), OR
• a down payment for a newer, nicer car on a trade-in.

But what if, instead, that same $1,500 was used to pre-pay your family’s electric bill (average $150/month) for 10 months? That would provide instant cash access of $150/month for 10 months!

Think of all the fun your family could have each month with that extra money. You could go to a museum, or go to the movies and dinner, or save a couple months and go to the local attractions. You could eliminate a bill that you pay each month, freeing up room in your regular budget and allowing you to create a new budget item of “FUN!”

Alternately, you could choose to pay off a debt, freeing your family of the burden of monthly payments and opening up that money for spending. You could also save or invest that money and see real dividends! That same $1,500 saved, or better yet, invested, could provide you with some real earning potential over the course of just a few years.

For a relatively conservative example, let’s say that your family invested the $1,500 in a return that yielded 4% compounded annually. The first year you would have $1,560.00. Doesn’t sound like much, does it?

Let’s say you decided to do the same again with your return (each year being $1,500) for an additional 3 years. In a matter of 4 years, your family would have $6,369.70. Doing this for 10 years in would leave you with a comfortable $18,009.16.

Now THAT is something to get excited about! Think of all the ways you could spend all that money.

I think you might agree it was worth the time and energy spent saving. Sometimes the best way to spend your tax refund is not at all!

What Does Being Frugal Mean

There’s been a lot of talk about being frugal and being thrifty.  Ever since the US economy took a downturn it’s been a popular topic in media and around the web. Living frugally has also become a necessity for many of us. Let’s talk about what it means to be frugal, dispel some myths and misinformation and look at what it means to live frugally.

Being Frugal Doesn’t Mean You’re Poor or Cheap

red product tag

There are two common misconceptions about frugality. The first is that people who live frugally are poor. It’s actually the opposite. People who live frugally are smart with their money and use it wisely. As a result they aren’t drowning in debt and their bills get paid on time. Yes, you can live frugally on a small income, but many frugal people earn a decent living. They chose to live well below their means and spend money on what’s important to them.

Being frugal also doesn’t mean you’re cheap. Not having the biggest house on the block or the fanciest car in the neighborhood doesn’t make you cheap, it makes you smart. Yes, it can be a fine line between being frugal and being cheap, but there is an important difference. Being cheap often involves hurting someone else, while being frugal means you decide to forgo something so you can spend your money elsewhere or save it for a rainy day.

Here’s an example. Let’s say you’re going to your favorite fast food place and grab a burger and some fries. A cheap person will grab a big handful of ketchup packets to use at home later. A frugal person will save any leftover ketchup packets and use them later so they don’t go to waste. It’s a fine line, but there’s a difference.

Being Frugal Means You’re Smart About Spending

The main thing I want you to understand about being frugal is that it means you’re smart about how and where you spend your money. It’s a conscious decision and often requires a bit of planning. Instead of giving in to impulse buys (be it groceries you don’t really need or a new pair of pretty shoes), a frugal person decides she doesn’t need those items and saves the money instead. As a result she can then turn around and enjoy a fun vacation or make a down payment on a home. Or it may mean she can stay at home with the kids. Being frugal means you have options and that’s a beautiful thing to have.

Easy Ways to Manage Bill Time

“Bills and Pills; Bills and Pills” to quote Disney’s Pollyanna.

woman using smartphone and laptop near black table

No one likes them! But they are just some of life’s necessary evils. While I can’t give you a pain-free experience when paying your bills, I can help you make the actual mechanisms of paying bills a breeze and sometimes, that’s half the battle.

In this wonderful word of technology, we have great tools available to us but in most cases, they are categorically under used! Below, we’ll discuss some tools in the toolbox of bill paying that you can use to make the process easier. We’ll also address their pros and cons so you can decide which are right for you. Having a system, no matter what you choose, is the most important thing you can do to make your life easier.

  • Tool #1 – Auto Pay.

Pros: Set it once and forget it! Often the vendor itself will have an auto-pay option on their website. You simply enter the amount you want to pay, your routing and bank information, and date of debit, and you’re set up. Your bills will be automatically debited each month.

Cons: If you run into some cash flow issues, you have to be sure to go in and change or cancel the debit date within the allotted period they allow you to change it, OR you will overdraft your bank account. If you have irregular pay dates, this may not be a good option for you.

Hints: You can set your payment within the grace period even if it is after the due date without needing to request a payment date change. It’s usually 10 days, but don’t assume! Make sure you check that you’re not accruing late fees or bad pay history by over-staying your grace date. Also, if you need to, vendors typically allow one due date change per account history, so if you know the due date won’t work for you, change the date. But choose wisely- typically you get only one shot!

  • Tool #2 – Online Bill Pay.

Pros: This system is typically offered through your bank, although some vendors offer the one-time pay option as well on their websites. Done right, you can spend an hour or so once a month, and set up the dates that you want the vendors to debit your account for that month’s bills. This is a great system for those with irregular pay dates because you have more control and insight into your budget and cash flow for that month!

Cons: You have to invest time monthly to set up these payments.

  • Tool #3 – Banking Apps.

Pros: This is basically the mobile version of #2, but many people don’t remember to use the apps for their bank. You can do all the things on your app that you can do on their website in most cases, but they are more user-friendly. The mobile banking app is convenient because you can utilize it while on-the-go (think lengthy medical appointments waiting room times, and dead times at the soccer field, etc.) so if you’re a multi-tasker, this is a great tool!

Cons: If you lose your phone or it’s stolen, you run the security risk of someone having access to your banking info. These days though, our phones are an extension of our wallets and we all know to treat it as such! Just be sure to include security measures as you would for any other information you don’t want shared with a thief. (password protection, lost phone locator apps, and etc.)

With a little planning each month, your bill paying nightmares can be a dream! Don’t delay! Get a system in place today.

Dollar Store: Deal or No Deal?

Everyone loves to get something at a discount.

I mean, who doesn’t seriously L-O-V-E a good deal? However, one thing we all need to learn is how to discern if a deal really is the good bargain it seems to be…a good deal has to actually be a good deal.

If you like to shop at a dollar store you might be making the mistake of assuming any item for a dollar is a good deal but that might not be true.

dollar-currency-money-us-dollar-47344.jpeg

Here are a few tips to review before your next trip to the dollar store to make sure you are getting the real deals that are offered.

Make a List.
How many times have you run into a dollar store to pick up a couple of items and $76 later, you come out, hands full, with stuff you never intended to buy. You need a list of items to buy so you can avoid mindless shopping and blowing your budget on items you just don’t need!

What items should be on your list:
• Office supplies
• Art/School project supplies
• Books
• Cleaning supplies
• Home Décor
• Party Décor
• Small Door Prizes
• Stocking Stuffers
• Hostess gifts (bath & body lotion, wash, pretty scented items)
• Beauty Products (shampoo, soap, hair accessories, hair spray, cotton swabs, and etc.)
• Batteries (they seem to last just as long as more pricey brands

What should NOT be on your list:
• Medicine, (from a financial perspective alone, 8 pills for $1 isn’t a good deal!)
• Toys
• Plastic Wrap
• Paper products like paper plates, cups, toilet paper – quantity and quality issues make this a no deal.

Something else you should not have on your list is any item you have not priced out prior – for example, food.

A can of vegetables seems like a great buy – it’s just a $1, right? But had you shopped at your grocery store, you could have gotten them for .50 cents or less on sale. It turns out that isn’t such a great deal after all. Another great example of this is meat. Some local dollar stores sell bologna, ham, turkey, etc. for $1. But it’s a 1/8 of a pound so many are paying $8 for a pound of meat! No. Again, any item that you have not calculated at a comparable price at another store should not be bought at the dollar store. Chances are you will be overpaying.

Something to remember; always check the quantity of any item you are buying. $1 for a product simply packaged smaller is not a good deal, even when it feels like it! Run the numbers before you shop!

4 Things That You’re Probably Overpaying

Have you ever received a bill in the mail to renew a service and you realized that:

1) you were already paying for that same service with another company and

2) you were already covered for the same service by an even different company?

person holding coins

Here’s an example: Are you paying for towing assistance through a roadside company? Take a look at your car warranty. Are you paying to include that? Now check your automobile insurance policy. Are you covered for towing? If so; then you’re already paying for that service.

Here’s a list so you can do your own inventory and find some savings in your budget where you can cut the fat!

Road-side Services
So, we’ve discussed this. But start here. Take a look at what you are currently paying for, what might have duplicate coverage and what you’d be able to drop altogether. You can save money by not renewing your road-side service and dropping the monthly towing and car rental package on your insurance because it might be covered under your car warranty. Before you drop anything, make sure the service you keep is what you truly need, you don’t want to be under-prepared, but you also don’t want to be double-paying for services you already have covered elsewhere.

TV Services
Here we’re talking about – Netflix, Redbox rentals, Hulu, Roku, Dish, Cable, Direct TV. All of it. Many people have multiple subscriptions but a quick analysis of your viewing habits can show you what your true needs are. It doesn’t make sense to keep two services when one does the job. You can save $1,022.40 a year by dropping an $80/month satellite service and skipping a $2.40 weekly trip to the big red box. Instead, just keep the streaming movie and TV series subscription. You might have to wait for a few weeks to watch the latest movies, but you probably won’t hate all that extra money you saved!

Phone/Internet/TV Services
We all know this, but how many of us actually DO this? Bundle, Bundle, Bundle! If you are going with a TV service as listed above, and you have internet or phone services, then be sure to get a bundle price. ALSO – never feel bad asking for a discount. If you see a new customer offer, (especially when you are out of contract) be sure to ask if they will extend the deal to you. You will have to speak to the customer retention department (rather than customer service) but they will likely offer to give you the same deal if you express your desire to go elsewhere if they can’t extend the offer to their loyal customers.

Internet
Unless you work from home then perhaps you should investigate using your cell phone as a hot spot to provide internet service for your devices. For just a little more a month (and sometimes it is a provided service, depending on your cell plan) you can use your cell phone service to also stream the internet. Make sure to check into this before forking over a monthly internet service.

Alternatively, you could cut the data service from your cell phone provider and use Wi-Fi on your phone instead. Think about how and where you use the internet and make the choice that will work best for you and your family.

Use these tips to start reviewing areas where you may be over-paying and start saving today! And don’t stop there! Make a list of other areas you thought of and get to work, saving your hard-earned dollars.