Why You Should Save Your Tax Refund This Year

coronavirus, tax refund, taxes

Illustration for article titled Why You Should Save Your Tax Refund This Year

Image: Shutterstock

When it comes to tax refunds, the standard financial advice basically comes down to “either save your refund or use it to pay off debt.” (Yes, I know that a lot of people use their tax refunds to cover other big financial goals, from vacations to home repairs; I’m just telling you what the typical financial adviser might recommend.)

This year there’s another piece of financial advice to consider: whether you should save your tax refund to cover the costs of the coronavirus.

As Michelle Singletary explains, in the Washington Post:

A few thousand dollars from a tax refund could go a long to pay some bills should your income drop because you become ill or have to be quarantined. If schools are closed but you still need to head into the office, you could use the cash to pay for day care.

I’m not trying to scare you, but you should be asking: How will I manage if my employer decides to impose a furlough and force me to take leave without pay? What if I run out of paid sick leave?

Singletary advises readers to hold off on any tax refund “fun purchases” for now, and she even suggests not putting as much of your refund towards debt repayment. Why? Because if you’re in a situation where you’re no longer earning as much income, you might be able to put groceries on the credit card—but you’re going to need cash to pay your rent.

And, for many of us, a tax refund is one of the biggest cash inflows we get all year. So ask yourself whether it’s better to keep that cash in reserve, until we know a little more about what’s going to happen with the coronavirus and how it’s going to affect both the economy and your personal life.

Source link

Leave a Reply