BOSTON (CBS) – The IRS has processed nearly 50 million returns, about one-third of the total individual federal income tax returns the agency expects to receive this year, with almost 83 percent of those returns resulting in refunds.
Almost 40 million tax refunds worth nearly $125 billion have been issued as of Feb. 20, according to IRS. The average refund is $3,120.
A refund is not a windfall! Too many treat it as such. It is a return of your money. You allowed your employer to withhold too much money last year and you are just now getting it back.
So what to do with that refund? Well as you all know I usually recommend the practical stuff. So don’t even think about rewarding yourself with those dollars if you don’t have an emergency fund or if you have credit card debt!
A recent survey found that 60% of surveyed households had experienced at least one financial crisis in the last year — and 50% lacked any emergency savings to help them cope. Consider using that refund to save more in a Rainy Day fund.
Your Rainy Day should have in it at least 3 months of living expenses. This money is for an emergency such as loss of income or unexpected medical bills or your car breaks down.
Three months of living expenses is not the same as three months of income. You need only cover the basics in your budget. What will it take to maintain your lifestyle, rent/mortgage payment, groceries, monthly utilities, childcare, insurance payments, taxes, etc.? That’s the amount you’ll need.
If you are single or the sole breadwinner in a family, an emergency fund is extremely important because you don’t have the luxury of a second income to cushion some of the emergency. My recommendations are as follows:
- Bare minimum for anyone: 3 months
- Children & 2 steady incomes: 3-6 months
- Children & 1 steady income: 4-6 months
- Children & no steady income: 6-9 months
One more thing: To check on your refund go to the IRS’ website.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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