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What To Do With Your Tax Refund
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Tuesday is the deadline for filing your taxes, and the IRS reports that as of early April, almost 80 percent are in line to get a refund.
Here & Now's Eric Westervelt speaks with CBS News' Jill Schlesinger (@jillonmoney), host of "Jill on Money" and the podcast "Better Off," about financial planning tips for how to use that money.
"It's amazing to me how many people just think this is money that falls from the sky," Schlesinger says.
The Certified Financial Planner's Guide To Tax Refunds
"We'd like you to do something a little bit more, let's say, smart, with that money than just leaving it there," Schlesinger says.
That means:
- Putting away money for six to 12 months' worth of expenses in a safe, accessible account — an emergency reserve fund.
- Paying down credit card debt, auto loans.
- Using money for short-term expenses like tuition checks — not the newest iPhone
What Do Most People Do With Their Refunds?
"A lot of people will save it, but I think that we might have gotten a bit of a clue in our March retail sales report that just came out this morning: that a lot of people go and spend it. And I hope that you can spend some of the money, but you know, it's hard. It's delayed gratification, right? What do I want to do? Buy a toy for myself, or do I want to boost my retirement contributions, or get a jump on my IRA funding, or put money in that 529 plan?
"I sort of sound like an old schoolmarm when I say to do those things that delay gratification when the alternative is to do something fun for yourself. So maybe take a few hundred dollars and have some fun, but really try to use this money and deploy it in a way that's going to really help you achieve your financial goals."
How Is Retirement Planning Affected By The Republican Tax Cut?
"Retirement planning in and of itself is not actually so much impacted. We know that the limit has increased for 401(k) and 403(b) plans to $18,500. If you're over 50, you can add in a catch-up contribution of $6,000. You still have your Roths and your IRAs. I think the biggest change is that, for some people, your cash flow is actually improved this year because a change in withholding, and if that's the case, you might as well take that extra cash and get it to work. Boost those contributions to your retirement plan, use your tax savings wisely."
This article was originally published on April 16, 2018.
This segment aired on April 16, 2018.