Is there a tax refund or stimulus check coming your way? If so, what plans do you have for this money?
This past year has impacted so many parts of our lives. Many of you lost your jobs, had your hours reduced, you found another job or you found yourself working overtime due to the work that you do. Some of us had to ‘pivot’ and create new jobs to support ourselves.
Many started working from home which brought on many different challenges. Parents and children became common fixtures all day, every day. Technology challenges to be able to work or complete schooling from home created new expenses.
What lessons have you learned about your finances over the last year? If you lost your job, did you have enough money set aside to pay your bills until you started working a side gig, found an online, remote job or began drawing unemployment?
If you kept your job, what savings were you able to see due to reduced family activities, remote work or were your expenses increased due to new expenses?
Regardless of which category you fall into, I hope that you have been able to increase your financial knowledge. Is a tax refund or stimulus check coming your way? If so, consider these four ways for how you can use it to build up a reserve to cover your future expenses.what will you do with your stimulus money or tax refund?
I use Dave Ramsey’s recommendations when I am working one on one with individuals who are working through what to do next. He recommends that you prioritize your expenses with the following four categories.
Groceries–who depends on you for their source of food? Do you have enough money put aside to feed you and those dependent on you for the next 3 months?
Roof over your head–are you current with your rent or mortgage? You need to have a safe place to rest your head.
Electricity, water, gas, internet--you have to keep warm or cool depending on the season. Internet is included here especially if your income depends on being able to work remotely.
Transportation expenses–you have to be able to go to work or school. What does that cost you? Do you need new tires or have you delayed any maintenance work? This is a great time to have work done so that you can extend the life of your vehicle.
As you are anticipating this next round of stimulus money or an upcoming tax refund, consider how you can use it to build up a reserve to cover the four categories listed above. If you don’t need it for these categories, start a savings account so that you have something to fall back on if an emergency comes up. ($500-1000) After that start working down any other expenses that you have not been able to tackle this past year. 2020 was a crazy year and I hope that 2021 brings more stability.
There are many ways to move forward. Visit Dave Ramey’s website for more information on this topic and to read about his approach to reducing debt so that you can create wealth.