When you create your budget, you might include the extra income you receive from a bonus or a tax refund. The Motley Fool explains why you may not want to count on these, though.
When it comes to budgeting, it pays to plan your income conservatively and err on the side of caution. For that reason, you may want to skip including a bonus or tax refund as income. The Motley Fool explains:
Bonuses in particular are by no means guaranteed, and if your company has a bad year or you don’t meet certain goals, you might not see that extra income this time around.
Tax refunds can be tricky, too…But even if you’ve snagged a sizable refund over the past few years, it can be tough to figure out where it came from unless you’re really in tune with your finances. It could be, for example, that you were eligible for certain tax credits or deductions in the past that no longer apply. That’s why banking on a bonus or tax refund can really hurt you. If you count on money that never comes your way, you’ll risk overspending and taking on debt.
On a more positive note, let’s say you don’t budget for your bonus but you get one anyway: Even better, it becomes a windfall you can use toward financial goals, debt or other priorities. In other words, instead of relying on this extra money, you use it as a financial buffer.
For more budgeting tips, head to the full post at the link below.
5 Budget Changes You Need to Make This Year [The Motley Fool]