Tag Archives: refund

Freshman Boot Camp: Budgeting Your Financial Aid Refund

9 Aug

One of the mantras told to college students is to “Live within your means”. While it’s good advice to generally follow, it doesn’t get at how difficult it can be to do so while you’re in college. One of the biggest challenges college students face is that their incoming flow of cash tends to be extremely irregular.Budgeting your Refund.png

You might be sitting on a big pile of cash after your financial aid refund comes in, but if you don’t budget it correctly you’ll be broke before the semester ends. So in order to avoid eating exclusively ramen at the end of the semester you’ll want to come up with a strategy for taking care of your money!

As a student, you probably have three potential avenues to get an incoming cash-flow. They are your financial aid refund, a part-time job, and cash gifts for holidays and your birthday. Your parents might also throw something your way once in a while but no one wants to have to ask just because you weren’t keeping track.

Making a realistic budget can be tough but once you know your income it does get a little bit easier. So total up what you’ll get between your financial aid refund and what you’ll get from work. If you know for sure what you’ll get for gifts you can toss that in, but that’s not a for-sure thing.

Next, start by totaling up all of your projected expenses for each month. Aside from obvious things like rent, utilities, food, and other monthly bills you’ll need to include a projected number for having fun. If you know some times of the year like Grand Prix or Homecoming you’ll be spending extra, try to account for that by varying it up by month.

What’s important here is to make sure that your total income is higher than your total expenditures. If it’s not, there’s going to be a big problem.

Assuming the numbers add up, you’ll have a little bit of a strange result. You’ll have your monthly expenditures but your income will be a combination of paychecks and a one-time refund from your financial aid.

There’s actually a surprisingly simple way to be able to make this into a steady income flow without being tempted by the big number in your checking account.

This method is called using a Holding Account. Basically you take the lump sum of money and deposit it into a bank account and set up recurring transfers to your primary checking account on a monthly basis. This way between your income from work and the transfers you’ll be able to pay your monthly expenses without having the temptation to make a big impulse purchase.

If you want to de-automate it a bit, you could actually have them both as checking accounts and write a check from your holding account to yourself on a bi-weekly or monthly basis and deposit it into your other checking account.

This system is not fool-proof but it combines the ability to pay your bills and have some fun while also putting up a small barrier to the full sum to keep you from tapping out your semester’s funds on a whim.

Something to note: make sure that your holding account doesn’t have any fees related to minimum transactions or minimum balance if you can. It doesn’t make any sense to pay one bank to hold your money when there’s plenty of others that’ll do it for free.

If you find that your financial aid refund is going to be much more than you’ll need to meet your expenses and you’re taking loans, it’s worth looking into reducing what you borrow. Remember that not only do you have to pay back what you borrow, you’ll be accruing interest on most loans until the day they are paid off.

3 details you should know while preparing for tax season 2017

12 Jan

Tax season can be an exciting time for savers. This year, more Americans are opting out of a tax time splurge and focusing on getting ahead with their tax refunds.

Early filers can still file as they normally would, but we’ve got a couple tips in mind for how your household can use this information to make the most of your tax time preparations:prep-for-tax-season

  1. File a tax return, even if you do not owe any tax or are not required to file.You can’t get the EITC unless you file a return. End of story. Since the IRS estimates that about 25 percent of taxpayers who are eligible for the EITC fail to claim it, this is a vital first step in determining your eligibility.Bonus? If this is the first year that you are claiming the credit, you can use the EITC Assistant to see if you qualify for tax years: 2015, 2014 and 2013. You can file any time during the year to claim the EITC. Something to know: A new tax law will delay refunds that claim the EITC or the Additional Child Tax Credit (ACTC) until February 15. Learn more here.
  2. Decide where and how you will file your taxes and know your free options.Unless you know your return is going to be complicated this year, paying someone to file a tax return should always be a last resort. Decide whether you’d rather file online or in person, and then check out these free filing options:
    • Use Free File on IRS.gov– This free software walks you through a Q&A format to help prepare your return and claim every credit and deduction for which you may be eligible.
    • Try the Free File Fillable Forms– If you’re comfortable preparing your own returns, this option is for you! It allows you to file electronically using online versions of IRS paper forms.
    • Visit a free tax preparation site– If your total household income is less than $54,000 a year, you can seek free tax prep at one of thousands of Volunteer Income Tax Assistance (VITA), Military Volunteer Income Tax Assistance (M-VITA), and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, you can search online or call the IRS at 800-906-9887.
  3. Make a plan for your tax refund that accounts for the EITC/ACTC delay.We know it can be hard to come up with alternative funds if you already had plans for your refund early in the year, but don’t be suckered by refund anticipation products provided by many commercial tax return preparers. The loan fees will have you seeing red.If you start your planning by dedicating your refund, or at least part of it, to savings, you can get ahead of your savings goals. Enter  the SaveYourRefund promotion with $35,000 in cash prizes and 101 chances to win simply for saving a portion of your refund. For more information and how to commit to saving prior to filing your return , visit saveyourrefund.com.

Tammy G. Bruzon works for America Saves, managed by the nonprofit Consumer Federation of America (CFA), which seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth. Learn more at AmericaSaves.org.

%d bloggers like this: