Every year in late January, I start hearing my contemporaries start discussing what they are going to do with their tax returns. It usually centers around fun stuff (spring break money, a new phone, a clothes shopping spree, etc), but sometimes it is practical (debt repayment, car repair). I have NEVER heard of anyone in my generation putting away a return for pure savings. One thing I HAVE noticed is how many people spend their refund before it ever touches their hand.
Example: last year, a coworker at my second job decided that she was going to spend half of her refund on spring break expenses, and half on new clothes/jewelry/piercings/tattoos. I personally wouldn’t have spent my refund like she did, but it was not my money to spend. However, the money flew out of her hands before the refund ever touched her account – she put her purchases on a credit card and then said she would pay it off with the refund. Of course, because she did not manage her finances well, she ended up spending her refund when it came in and then had no money to pay her bill –or finance her spring break trip. The rest of her spring was spent hustling to try to pay off her credit card and have money for her trip.
The moral of the story? Don’t spend money before you have it. Oftentimes, this advice is given for windfalls, such as tax returns, inheritances, and large sales. It is equally important to remember this advice for regular income such as paychecks, or, if you are a contractor, your next job.
I have fallen victim to this in the past (and admittedly, started again since I bought my home). I may be running low on pay, but I know that my next paycheck is on Friday. I can go ahead and put some expenses on my credit card and just pay it off when I get paid on Friday – right? WRONG! That’s a terrible mindset to have – if something comes up in the next pay period, I have to repeat the cycle because funds that would have been available had to go to paying past expenses! It’s a vicious cycle, and it keeps the person using it stuck in a paycheck-to-paycheck scenario. My ultimate goal is to NOT be living from one paycheck to the next. I do have some modest savings put aside, but I really want to have enough cash flow so that I don’t need to dip into my savings or wait on the next paycheck to get here to make ends meet.
I suspect that the reason that I (and others like me) have fallen into this cycle is impatience. We live in a society that thrives on instant gratification and getting what we want when we want it. I have struggled with impatience my whole life and gradually have taken teeny tiny steps towards making it better. The urge is so strong, though – especially when you know that you can just pull out your credit card and get whatever it is that you desire right then and there. I am trying so, so, so hard to stop that. I usually don’t even get in that situation for “impulse” purchases – it is usually for things like groceries or gas that are necessary but probably could wait until I get paid.
It has turned into somewhat of a mantra as of late: “don’t spend it ‘til you have it, don’t spend it ‘til you have it, do NOT spend it ‘til you have it!”
What, if anything, tempts you to spend money before it comes into your hands? Food? Clothes? “Impulse” buys? Spill your confessions in the comment box!