“You must have a game plan with your finances, without it, you lose the game every time. A fool and his money is soon parted!”
For most people who don’t have much income this is a very exciting time of year, TAX REFUNDS! You may be so ready for February that you have spent the money in your head already, I know the feeling girl, I have done that too many times. If you think you are excited, think again, the corporations are much more excited than you are. Just wait, you will begin to see the commercials very soon, the ones that are having huge blow out sales to lure you to spend that “extra money”. Here’s a tip from me to you, DON’T DO IT MRS. CELIE! This is the year for you to take control of your finances and make a plan, so you won’t have to look up and wonder what happened to your thousands of dollars.
Let’s get into this plan guys:
1. Make a list of everything you would LIKE to do with the money, even if you don’t know the amount of your refund just yet.
This first step will be the easiest, think about all the things you would do right now if you had the money, and put the amount you would pay or put towards each item. Now don’t go crazy, you didn’t win the lottery, this is your tax refund so think practical. Your list can be as long or as short as you would like it to be, mine is about 5 items long, but this step is up to you. Don’t neglect to write down things you just want as well, it doesn’t have to be all needs. By adding in some wants, it will keep you focused on taking care of business, you can still have a little fun. However, do not, I repeat DO NOT make your wants more expensive than your needs; I suggest no more than 5 or 10 percent of your total refund. So far it should look something like this:
2. Arrange list in order of importance.
Okay, now this part can be kind of tricky if you feel like they are all important to you, however you have to make hard decisions. Arrange your list in order of importance and write the amount out to the right of each item. Make sure your goals align with the order of the list, you are trying to live your best life, and this can only be done with a plan. One year I received a large refund, it hurt at the time to see that much money go all in one lump sum, but I paid to go back to school and I must say that it was the best decision I have ever made. If you are having trouble with this step here is an outline to assist you (the branches on the list are just a suggestion):
- Savings – ALWAYS PAY YOURSELF FIRST!
- Need – Pay down a debt
- Need to take care of – Get something fixed
- Want – Shopping
3. Make a third column with a running total.
This step is easy, if you are good at simple math you should be able to add the totals in your head, if you need assistance just grab a calculator or use the one on your smartphone. I will try to make this easy, the first amount should always total the first item on the list, the second amount will be the first and second item added together, and the third amount should be a total of the first three items and so forth. Here is a chart of how to do the calculations if you are a visual person:
4. Once you know how much you will be getting back you can determine what you can do with your money. You have a plan!
Here you can see the purpose of your running total, it allows you to see how far your money can go with your list. Another advantage of creating this list is to be able to utilize it whenever you get some unexpected income at any point, such as a bonus check, or commission. You can always add to the the list when you cross things off, and re-prioritize when you make alterations. Finally, here is what your list should look like when you are done, the arrow is showing how deep you can cut into your list when you know the amount of your check (For purposes of this example I used a refund in the amount of $3000):
You may not have been able to get that TV or any new makeup, but you got to save, pay debt, fix the car and do a little shopping! Instead of wondering where your money went, you can account for every expense and be proud of your accomplishments.
Those who don’t have a plan for their money will always be left wondering where it went, if you make and stick to this list, it will allow you to be in control of your money. Don’t just go out and blow it, make your money obey you, know your priorities and fulfill your goals. This year you can choose to do something great with your money, pay yourself first before you give it to the billionaires in our society!