Broker Check

Tax Refunds and Purchasing Decisions

April 11, 2024

Opening my email yesterday I noticed many emails telling me how to spend my tax refund. A tax refund that hasn’t even arrived yet. Everyone is telling me how to spend money I don't have, and no one is telling me why to save it or invest it. So this raised a topic inside the office with the L2 Advisor team: how can people approach spending their refund?

To start off, let me remind you that we have a blog to inform, not instruct. Always discuss issues such as this with your financial advisor. If you don’t yet have a financial advisor, you’re welcome to set up a Fit Meeting with our team using this link.

One thing I hear often around tax refunds, is the concept of “treat myself”. The TV show Parks and Recreation had a whole episode about why it’s good to “Treat’Yo’Self”, and while we are fans of the show and know it is a comedy, we want to make it clear: it isn’t financial advice we would listen to. It isn't "found money" or "free money" either, on that note.

Perhaps the first  best way to ‘treat yourself’, is to look critically at your finances and to Pay Yourself First. There are perhaps few better rewards than working hard towards buying something that you have budgeted for. When it comes to deciding how to use your refund, be sure to work with your financial professional to find the areas of best impact.

As a general discussion of goal setting and financial decision making, let’s explore how a vision board may be used to assist with purchase decisions. This is an exercise for all ages, consider sharing with family and friends! 

Purchase Comparison Vision Board

  • Print off or Cut Out images for items you want to purchase.

  • Label them “I need”, “I want”, or “I wish”.

  • Mark the prices on the images.

  • Tape them to a wall, or on a whiteboard or however you need to accomplish a vision board!

  • As you place the items, focus on cost comparisons. For example, we have a simple chart below. We may need car repairs, but want a better car or wish we had that sports car we have been dreaming about.
    • If you're doing this with kids, teach them the value of saving money for a larger purchase. Show how they may "need" a new toy, but saving could help them reach the toy they "wish" they had! 

 

As you frame these decisions, consider those price tags we captured! Before making any decisions, work with a financial advisor to understand how the purchase may be within your financial reach or not. By having conversations like these internally, or with our spouses and partners, you will walk into your meeting already able to articulate the financial decision you’re making. 

If you would like guidance on using your tax rebate check, a major financial decision or are interested in the wealth management process with our team, please Schedule a Fit Meeting with us today. 

In the image above, we could also add a used version of the fancy "I wish" sports car. Think critically: where would you put that icon, and why? What about a used car that (arguable) isn't practical, such as a manual roofless jeep for someone that lives in North Michigan? Tell us how this thought experiment works for you!