In the month of January, many of us are looking at our finances for the rest of the year. And with tax season upon us, it's important to know how to best use your refund.
Robert Persichitte, an associate finance professor of accounting at Metropolitan State University Denver, gave CBS News Colorado anchor Mekialaya White a breakdown on First at 4.
"What gets me out of bed in the morning, I'm one of those people, where I care about the issue of people getting ripped off," Persichitte he said. "Or someone who's unscrupulous trying to take advantage of somebody," he explained.
Persichitte says now is the prime time to start looking at finances to ensure stability.
"Going into the year, people have a lot of optimism, and you can make these changes that are going to have a long-term impact on your life," he continued. "It's the right time to plan. Our goals are shifting, things are changing. And at the beginning of your financial plan is that prioritization, saying these are the things I care about. Build budgets, understand what money is coming in and going out and how that money is getting you closer to your goal."
He offered practical advice for stretching your tax refund: "You can get government bonds, that's something that you can elect with your tax refund. I don't know about you, but if I see the money, I want to spend it. One of the best things you can do is elect that to go into your savings you can get the government bonds directly on your tax return, you can elect to have your refund go into your savings, so you're not tempted to spend the second it shows up. Think about it beforehand. Think about it when it's boring. You want to get emotions out of your finances. Just because you're getting a refund, you're still spending the money."
"So, saving your money versus paying down debt, what's your advice with that?" White asked.
"Whether we're saving money or paying down debt, we can look at the interest rates and mathematically find the highest interest rate. If you have a credit card with a 20% interest rate, you are going to be financially better off to pay that down than to put it in a savings account where you're only earning 2%. If you have lower interest rate debts like a mortgage, say under 4%, you might be able to get just as much or more from a bank account. Also, how are you going to respond going forward? So, if you are going to pay off those credit cards then run that balance up next month, that's probably not the best strategy," said Persichitte.
He warns people to beware of tax preparers that can unknowingly scam you out of money: "They may try to charge more. It's illegal to charge a percentage of a refund. Maybe they say I'm doing extra services. Look at the bill and if you're working with a preparer and something doesn't feel right, don't be afraid to walk away."
Starting Jan. 28, MSU Denver is launching a program on the Auraria campus each Saturday, where families making under $60,000 with simple tax returns can get their taxes prepared for free from volunteer preparers through Tax Help Colorado. To learn more, click here: https://taxhelpco.org/
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