By Tech. Sgt. Wes Wright
50th Space Wing Public Affairs
SCHRIEVER AIR FORCE BASE, Colo. — The Airman and Family Readiness Center hosted a Make the Most of Your Tax Refund class March 1 at Schriever Air Force Base, Colorado, as part of Military Saves Week, which ran Feb. 26 to March 3.
“We wanted to help people understand how to make the most of their tax refunds,” said Liz Archuleta, community readiness consultant with the 50th Force Support Squadron. “It’s important people either have a plan in place for those large sums of money or know how to put that money back in their paychecks.”
Military Saves Week is part of a larger initiative by a nonprofit organization called America Saves and the American Savings Education Council. This year, organizers are stressing the importance of having a plan.
Archuleta taught the tax refund class and advised people to follow a “30-40-30, past, present and future” plan.
Past: designate 30 percent of your tax return to paying off debt and catching up on outstanding bills.
“Always pay on your past first,” Archuleta said. “A lot of times people don’t focus on getting ahead on payments. They think, ‘oh I’ll just keep making the payments and it will be fine.’ Well, the longer you take to pay something off, the more interest you pay.”
When it comes to choosing which bills to pay off first, Archuleta said there are two schools of thought.
“There’s something to be said for paying off the debt with the highest interest rate first,” she said. “That’s a very sound decision. However, financial experts also tell us that it’s smart to pay off the smallest debts first, because it gives you a psychological boost to pay something completely off. It motivates you to do the same with other bills. So, if you’re the type of person that needs to see impact right away, pay a small debt off first.”
Present: earmark 40 percent for current use.
“The present is a reward system,” she said. “Sometimes it can feel overwhelming if we get a large return and know you don’t get to see any of it because it’s all going towards bills. We are creatures who need a boost sometimes and want to spend a little on ourselves.
“This isn’t to say you have to spend 40 percent on yourself,” she continued. “You can adjust any one of these numbers to emphasize what’s most important to you. If you can emotionally handle putting all that money towards bills, then go for it.”
Future: use 30 percent to jumpstart an emergency fund or longer term savings.
“Studies have shown people live paycheck to paycheck or on credit cards,” Archuleta said. “Fifty percent of people do not have enough money to cover emergencies in their savings. A good rule is to have enough money to cover your bills for three to six months in your savings. However, at a minimum, you should have enough money to cover the deductibles on your car and homeowner’s insurance.”
According to Archuleta, emergency funds are of particular importance to married Airmen.
“In the event you get orders to move, usually a working spouse quits their job first,” she said. “If your bills are such that it requires the spouse to work, there’s going to be a period where that person is unemployed and it will be critical you have enough money saved up to cover your bills until they can start working.”
For people who get large returns at tax time but struggle paycheck-to-paycheck during the year, Archuleta suggested adjusting deductions in MyPay so the money is spread throughout the year.
“I see so many people who get massive returns but barely get by during the year,” she said. “I strongly advise those people to reroute that money into their paychecks instead of deferring it until tax season.”
To avoid confusion over how many deductions to claim and to associate dollar amounts with the number and types of deductions, Archuleta advised people to use the withholding calculator on the Internal Revenue Service website before adjusting their deductions.
Staff Sgt. Fallon Dortch, counterspace threat analyst with the 310th Operations Support Squadron, attended the class and found it helpful.
“I didn’t have as solid of a plan laid out before I took the class, but I’m going to follow the 30-40-30 plan,” she said. “I struggle with ‘want versus need’ sometimes, but something like this will keep me accountable. I have debts I need to pay, but it’s nice to know I don’t have to spend it all on debt and not feel bad about it.”
Dortch encouraged people to take advantage of the resources the A&FRC offers including financial classes like this.
“There are big changes coming to tax law this year, so it’s important people stay informed,” she said. “If you have a chance to go, you should.”
For more information on financial classes and resources, contact the A&FRC at 567-7347.