We get our refunds, pay a big debt, but still can’t recover a year later
Despite pocketing more cash when tax season rolls around, families are finding out that their money doesn’t go very far.
Forty percent of American families are making thousands of dollars in medical, auto, or tax payments at some point in a year and it normally bumps up around tax season, JP Morgan Chase says. Families tend to get tax refunds and then simultaneously pay off a big debt, but it turns out they don’t recover from those expenses even a year after they’re paid. In other words, tax refunds are barely keeping us afloat.
Diana Farrell, president and CEO of JPMorgan Chase Institute, says the two-year survey took an extremely detailed look at family finances and discovered this trend.
“Even with more money in their pocket from tax refunds, the strain of major and unexpected medical costs are hitting families hard and making it difficult for them to recover.”
Big findings: major payments happen when families can afford it
Chase says families may have delayed medical treatment or paying a late medical bill because they couldn’t afford it. This means financial health is inherently linked to medical health. Have you ever put off a procedure, appointment, or surgery because you didn’t have the money?
While four in 10 families are making thousands of dollars in medical payments each year, it’s interesting to note that there’s a spike in payments during the tax season months, like March and April. But even after families paid off these major debts, they had a hard time recovering financially long after one debt was gone.
“While older families typically had less volatile incomes, they exhibited a larger range of income and expense volatility,” the report says. “Families over 65 years of age were more than twice as likely as families under 25 to have made an extraordinary medical or tax payment.”
We’re not prepared for emergencies
Most Americans can’t handle basic household needs for three months if they lost an income. We’d turn to credit cards to bail us out in the event of an emergency, like a layoff or accident. Some would turn to their retirement savings but there’s a good amount of us that would just not pay our bills.
According to the Chase report: “Month-to-month fluctuations in expenses were roughly equivalent to a month’s rent or mortgage payment.” This means that some months, people went without paying their rents, and in other months they paid late fees for not paying on time.
If you’re not being careful with your money, regardless of your income level, you probably aren’t ready for an emergency. You may think you’re too young to save (you aren’t), or you need to make more money first (maybe, but making some drastic spending changes will help).
Maybe you’ve got other priorities, which we all seem to have, that prevent you from throwing cash into an emergency fund — or you’ve got debts and all your extra cash goes there. Don’t let your adult responsibilities get in the way of making sure you can bail yourself out of a rough spot. You can’t always count on friends and family (and you probably shouldn’t) and you definitely shouldn’t wait until something happens for you to figure out a solution.
How can you make extra cash to go toward that emergency fund? These weird ways may help.
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Article last modified on November 1, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Tax Refunds Aren’t Getting Us Out of Debt - AMP.