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Your Finances Require a Makeover If You Need to Use Your Tax Refund to Achieve This



Your Finances Require a Makeover If You Need to Use Your Tax Refund to Achieve This

Tax returns for 2023 aren’t due until April 15, but many people have already filed. The desire to receive their refunds as soon as possible is a major driver behind the filing of so many tax returns before the deadline.

This year, the IRS has paid out $3,213 in average tax refunds. Though the number may fluctuate throughout the season, it’s not likely to be negligible overall.

Your tax refund might be what you need to pay off outstanding debts or make up for any bills you haven’t paid yet. That being said, you might need to make some significant changes to your finances.

There’s no guarantee of a tax refund

Perhaps you’re one of those people who consistently receives a tax refund each year. However, there might be some years in which you aren’t eligible for a refund. Additionally, there might be years when you receive a substantially smaller tax refund than usual.

Your eligibility for a refund and the amount you can get depend on several different factors. There may be a year in which your income increases or in which dividends and capital gains, for example, bring in more money for your brokerage account.

It can be challenging to predict your refund in advance as a result. It is not a good idea to assume you will receive a refund and to incur expenses thinking you will pay for them out of your refund.

An improved method for managing your finances

You might need to reconsider how you handle your money if you have unpaid bills that you can’t pay until your tax return comes in or if you have bills that you need to pay soon and are depending on your refund to cover. While a tax refund is the IRS’s method of giving you back money that you owe them, you shouldn’t rely on it in the same way that you can’t count on receiving a specific amount of money deducted from your paycheck. Rather than using your refund to cover regular expenses, you should consider it additional money that you can use toward more significant financial goals.

You might need to review your spending and make savings where possible if your paycheck isn’t enough to pay your regular bills. For instance, if rent takes up so much of your paycheck that you barely have money for groceries and utility bills, you might need to get a roommate.

Until your pay at your primary job rises, you might also want to think about starting a side business. In this manner, your side gig can function as a fairly reliable source of income, or at the very least, it can be far more predictable than a tax refund.

Saving money for a significant objective with your tax refund is a terrific idea. Nevertheless, it’s time to adjust your financial strategy if you depend on your tax refund to cover your essential costs or make up for previously incurred expenses. Do not forget that you may find yourself in serious debt if you do not receive your refund. You genuinely don’t want that, too.

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