The Only Joy of Tax Season - THE REFUND!!! (Part 1)

Hi folks! I know that the month of April is associated with rain showers, the dawn of a new baseball season and that ever present evil of filing taxes but as many of us have already (or will very soon) received our W-2 forms from our employer, what we are going to do with our tax refund is foremost in our minds.

The list of things to do with that eagerly anticipated refund is endless.  Take a vacation and/or buy a new car or some other big ticket item is usually what flits thru our minds, but what about saving a portion of that money?   If I’ve activated the killjoy button in your tax refund fantasies, I am sorry but this blog is devoted to assisting with financial issues.

When it comes to saving, most experts state that we should save 10 percent of our take home pay.  “Pay yourself first” is the mantra that professional financial counselors cite all the time, but for most people living paycheck to paycheck, 5 percent of take home pay is a challenge much less 10 percent.  What can be done?

If you have a tax refund coming, now would be the best time to commit to a savings plan. To make it easy, why don’t we start with 10 percent of that tax refund, let’s pay ourselves first.  Think about it.  Your tax refund is money that you have done without all year and should be treated as found money. Let’s see what the 10 percent savings rule can do for you. If your refund is $1000.00, 10 percent of that is $100.00.  That is a nice way to start a bank account or add to an existing one.  Once you have paid yourself, then consider a vacation or other big ticket item.  Also, if you have children, let them in on the “paying yourself” first rule. It is never too late to teach our young ones to be responsible with money. 

In a few days, I will chat with you about those refund anticipation loans tax preparers like to market to the public.  Until then, thanks for stopping by for a visit at MoneySideChat.

Hank

Have You Seen Your Credit Report Lately

Within the past week my buddy Bob told me his plan to buy a new car within the next 6-12 months. After congratulating him I asked Bob did he know his credit score and had he seen his credit report recently? I received the proverbial “deer in headlight look” and he told me didn’t know his credit score and had never pulled his credit report.  What I told him next, leads me into today’s chat. 

Your credit score (also known as your FICO number) is based on such criteria as your bill paying history, employment history and how much debt you are carrying versus how much credit you have available (i.e. credit limit on cards or a bank line of credit, etc.). Based on how well we manage our debt will determine if we have a low or high credit score.  Simply speaking, if we pay our bills on time, that positively impacts our credit score, if we consistently miss payment due dates or have an account placed with a collection agency, this could have a negative impact. 

How can a low credit score affect us? Well, let’s go back to my friend Bob.  If Bob pulls his credit report and discovers he has a low credit score, Bob will have to pay a higher rate of interest on his car loan and will no doubt have to put more money down toward the car purchase. The lower your credit score, the more of a credit risk a financing institution will see you as and the more you will pay for financing via higher interest rates.

This is why it is important to check your credit report and credit score periodically so as not to run into unpleasant surprises when you try to finance a car or home. From experience, there are no hard and fast rules when checking your credit.  Every 3 years is as ridiculous as everyday but for me personally I like to take a peek every 6 months to make sure that items are not appearing on my credit report that actually belong to another Henry Jackson. I also want to be aware of any possible mischief that identity thieves can cause. 

So in closing, reviewing your credit report and knowing your credit score is essential and it is easy as going on Creditkarma.com and signing up for a free report.  Thanks for the chat. Till next time.

Hank

P.S. –For more information on what is a good and bad credit score, please visit http://www.freescore.com/good-bad-credit-score-range.aspx

MoneySide is on your financial side!!

Hello everyone.  My name is Henry Jackson (please call me Hank).  The purpose of this blog is to offer the benefit of my experience with everyday household finances.  If you are one of the so-called one percent, then my blog is not for you.  My blog is for that section of the 99 percent that is having difficulty with everyday financial issues such as budgeting, managing debt, saving and investing and would like a little assistance.

I am not a slick talking professional who seeks to overwhelm with a lot of jargon.  I just want to share basic, time-honored principles that have work for others as well as myself.  With this introduction complete, I look forward to returning tomorrow to chat with you about the importance of managing personal credit.  Talk to you soon.  MoneySideChat is in session.

Hank