Braces for a child. Credit card bills. A trip to the Bahamas. Property taxes. A new leather sectional. Credit card bills. An adoption of a Guatemalan baby. A new in-ground pool. A down payment for a truck.
And more credit card bills.
This is just a sampling of what area residents will devote their federal tax refund checks to this year. Like millions of Americans, locals see refund checks as an extra savings account they almost forgot about. Some, though, have their checks spent even before they arrive. Businesses get giddy at refund time, offering special sales to lure in the taxpayer who just can't help but spend the check the day it arrives.
"It's just human nature," said local tax guru Bill Balyszak. "People like to get refund checks, and then spend them."
Historically, three-fourths of all taxpayers in the U.S. receive refund checks. According to the Internal Revenue Service, the average tax refund in 2004 was about $2,300. This year, as of Feb. 25, that number has jumped to $2,436.
But what's the smart thing to do with that brick of bills?
Balyszak, owner of BFS Financial Services and TaxSavers Income Tax in Auburn, has been working with taxes for 30 years. He, like most financial advisors, said frivolously spending a tax return is bad news. He believes that "if all your bases are covered," meaning all debts are manageable, "you should salt it away."
Balyszak said people should fight the knee-jerk reaction to go out and get the biggest, baddest flat screen, and instead, put the lump sum in a Roth IRA. This retirement savings plan pays big dividends. If you were to start putting $2,000 a year into it at age 25, by the time you were 45, you'd have $140,803, assuming a 10 percent growth rate each year. At 55 it would be $400,269, and at 65 it would reach $1,073,260.
Cha-ching.
"So much is different these days in terms of finances than just 20 years ago," Balyszak said. "Everyone wants everything now. Instead, invest for the future. The earlier you do it, the better off you are."
But Balyszak also realizes it's not always that easy. In 2004, an average household owed close to $10,000 in credit card debt - that could produce interest charges more than $1,000 per year - and the average student loan debt was $18,000.
If your bills have numbers like these staring back at you, Balyszak suggests signing over the refund check to "the debt with the highest interest rates first."
That's what Jason Yokom, 31, of Sennett, does with his tax returns. Yokom, a mechanical designer, said he "usually uses it for high-interest bills like credit cards."
But this year he had to pay off some unexpected dental bills.
Shirley Stoker, 63, an Auburn hair dresser, spent last year's check on bills as well.
"But this year it's going toward my vacation in Cancun," she said with a smile.
DeAnna Taylor, owner of Auburn Travel Bureau, said tax refunds have long been a favorite sponsor of sea, air and road trips.
Home refurbishing is popular, too.
Michael Lynch, owner of Lynch Furniture Company Inc., said "we get a lot of traffic in here from January until April 15."
His store holds three sales events during that time. But he places his tax return in his children's college fund.
And then there's the inevitable big screen television.
Rex TV and Appliances manager Eli Delgado, 28, said many shoppers come into his store and tell him they're using their refund check to buy a television.
There's a 43-inch Panasonic LCD projection big screen on sale right now for $2,299. You'd even have enough leftover for a few movies and a bag of popcorn.
Delgado is storing his refund check away for something extra special for he and his wife: a baby. The Delgados are in the midst of adopting a child from Guatemala.
"The lawyer and travel costs are incredible," he said. "About $25,000."
Delgado, like most taxpayers, said he isn't sure if he would save the money he gets in the return if he were to get it originally in his paycheck.
Most financial advisors will tell you that you really don't want a tax return.
"But there's a problem with that," Balyszak said.
"In theory, that's the correct thing to do. But people are not disciplined enough. At the end of the year they have nothing. I'm lucky if I have 1 or 2 percent of my customers who do that."
Bob Brower, director of the Institute for the Application of Geospatial Technology at Cayuga Community College, plans it out that way each year.
"You're much better off keeping your money than letting the government hold on to it interest free," Brower said. "My goal has always been to be as close as I can to not getting one."
Financial advisors say this way, you can take the extra money each week - based on the average, it would be $50 - and put it toward credit cards and other outstanding debt. In the end, you save yourself the extra interest that would accumulate over the course of a year. If you have no debt, you can put it away, thus earning more interest over the year.
That sounds good, and some can do it, but financial advisors forget taxpayers are human, and that new set of golf clubs looks so sweet, or how about a foie gras-filled night at Mirbeau Inn and Spa.
Or how about those braces.
Sue Canady, an Auburn nurse, was faced with having to unexpectedly drop her tax return this year on her child's compromised choppers.
"And any leftovers will be used to fix my car," she said. "Every year it goes to something."
Staff writer Benning W. De La Mater can be reached at 253-5311 ext. 237 or ben.delamater@lee.net
This is just a sampling of what area residents will devote their federal tax refund checks to this year. Like millions of Americans, locals see refund checks as an extra savings account they almost forgot about. Some, though, have their checks spent even before they arrive. Businesses get giddy at refund time, offering special sales to lure in the taxpayer who just can't help but spend the check the day it arrives.
"It's just human nature," said local tax guru Bill Balyszak. "People like to get refund checks, and then spend them."
Historically, three-fourths of all taxpayers in the U.S. receive refund checks. According to the Internal Revenue Service, the average tax refund in 2004 was about $2,300. This year, as of Feb. 25, that number has jumped to $2,436.
But what's the smart thing to do with that brick of bills?
Balyszak, owner of BFS Financial Services and TaxSavers Income Tax in Auburn, has been working with taxes for 30 years. He, like most financial advisors, said frivolously spending a tax return is bad news. He believes that "if all your bases are covered," meaning all debts are manageable, "you should salt it away."
Balyszak said people should fight the knee-jerk reaction to go out and get the biggest, baddest flat screen, and instead, put the lump sum in a Roth IRA. This retirement savings plan pays big dividends. If you were to start putting $2,000 a year into it at age 25, by the time you were 45, you'd have $140,803, assuming a 10 percent growth rate each year. At 55 it would be $400,269, and at 65 it would reach $1,073,260.
Cha-ching.
"So much is different these days in terms of finances than just 20 years ago," Balyszak said. "Everyone wants everything now. Instead, invest for the future. The earlier you do it, the better off you are."
But Balyszak also realizes it's not always that easy. In 2004, an average household owed close to $10,000 in credit card debt - that could produce interest charges more than $1,000 per year - and the average student loan debt was $18,000.
If your bills have numbers like these staring back at you, Balyszak suggests signing over the refund check to "the debt with the highest interest rates first."
That's what Jason Yokom, 31, of Sennett, does with his tax returns. Yokom, a mechanical designer, said he "usually uses it for high-interest bills like credit cards."
But this year he had to pay off some unexpected dental bills.
Shirley Stoker, 63, an Auburn hair dresser, spent last year's check on bills as well.
"But this year it's going toward my vacation in Cancun," she said with a smile.
DeAnna Taylor, owner of Auburn Travel Bureau, said tax refunds have long been a favorite sponsor of sea, air and road trips.
Home refurbishing is popular, too.
Michael Lynch, owner of Lynch Furniture Company Inc., said "we get a lot of traffic in here from January until April 15."
His store holds three sales events during that time. But he places his tax return in his children's college fund.
And then there's the inevitable big screen television.
Rex TV and Appliances manager Eli Delgado, 28, said many shoppers come into his store and tell him they're using their refund check to buy a television.
There's a 43-inch Panasonic LCD projection big screen on sale right now for $2,299. You'd even have enough leftover for a few movies and a bag of popcorn.
Delgado is storing his refund check away for something extra special for he and his wife: a baby. The Delgados are in the midst of adopting a child from Guatemala.
"The lawyer and travel costs are incredible," he said. "About $25,000."
Delgado, like most taxpayers, said he isn't sure if he would save the money he gets in the return if he were to get it originally in his paycheck.
Most financial advisors will tell you that you really don't want a tax return.
"But there's a problem with that," Balyszak said.
"In theory, that's the correct thing to do. But people are not disciplined enough. At the end of the year they have nothing. I'm lucky if I have 1 or 2 percent of my customers who do that."
Bob Brower, director of the Institute for the Application of Geospatial Technology at Cayuga Community College, plans it out that way each year.
"You're much better off keeping your money than letting the government hold on to it interest free," Brower said. "My goal has always been to be as close as I can to not getting one."
Financial advisors say this way, you can take the extra money each week - based on the average, it would be $50 - and put it toward credit cards and other outstanding debt. In the end, you save yourself the extra interest that would accumulate over the course of a year. If you have no debt, you can put it away, thus earning more interest over the year.
That sounds good, and some can do it, but financial advisors forget taxpayers are human, and that new set of golf clubs looks so sweet, or how about a foie gras-filled night at Mirbeau Inn and Spa.
Or how about those braces.
Sue Canady, an Auburn nurse, was faced with having to unexpectedly drop her tax return this year on her child's compromised choppers.
"And any leftovers will be used to fix my car," she said. "Every year it goes to something."
Staff writer Benning W. De La Mater can be reached at 253-5311 ext. 237 or ben.delamater@lee.net
