With the deadline to file your taxes just around the corner, now is a great time to evaluate your financial status. This is especially true if you are getting a tax refund. While it may be exciting to get that refund check back from the IRS, it is worth recognizing that by doing this you essentially let the government have use of your money throughout the year. Let’s look at some ways you can shift that refund to give you more flexibility.
Consider Adjusting Your Withholdings
When you get a refund, it means you overpaid your taxes. By changing your withholdings, you can get more money back in your paycheck throughout the year. This can be used to increase protection like disability income insurance, convert your temporary (term) insurance to more permanent coverage or increase liability coverage on your car or homeowners policies. Increasing protection helps you be less vulnerable and exposed.
Maximize Your HSA contribution
An HSA account is a tax-advantaged health savings account. HSA funds can be used to pay for qualified medical expenses at any time without federal tax liability or penalty. With this account, the money that you save rolls over every year and accumulates if not spent. This money can be spent on deductibles, long-term care coverage, and more. Any unused portion can also be used for future health care cost as you get older.
Save the Additional Money
If you are not saving the recommended 15 percent of gross annual income, allocate the additional money you receive in your paycheck to build liquidity, contribute to retirement or build wealth. Make this automatic so you don’t get used to spending the extra money.
Sit Down With an Adviser
This is the perfect time to sit down with an adviser and make sure you are taking advantage of all the tax breaks you are entitled to receive. You may also find that as things in your life change, so should your tax and financial plans. A change in your family situation like divorce, kids growing up, taking care of elderly parents and death can have an impact on your tax situation. Many people don’t realize the impact a change in their tax status can have. Going from married filing jointly to single, for example, can mean an increase in what you owe the IRS. Don’t get caught off guard. The more knowledgeable you are, the more opportunity you have to be prepared.
Ande has made it her mission to break down the emotional, behavioral and societal barriers that stand between women and strong financial foundations.
She's widely recognized as a driving force in the financial community, having risen to the top of the primarily male-dominated insurance world as the former head of a multi-million-dollar fintech company and a VP at Penn Mutual.
Ande launched myWorth to inspire a financial awakening among women who are eager to take control of their financial journeys. Her first book will be published in October 2019.