Your Tax Refund: 6 Smart Ways to Spend It
It’s that time the year again. The time to file your taxes and wait to find out if you owe Uncle Sam or if you’ll be enjoying a tax refund. If you’re one of the lucky ones who will be receiving a check back from the tax man this year, you may be debating on how to spend it.
Here are six ways to use your tax refund wisely
- Pay off debt. An unexpected surprise from your tax return is always a nice to have. What better way to use that money than to pay off outstanding debt. If you have credit card balances, the interest rate can be high, so use your tax refund to make lump sum payments. It helps get the balances paid off faster which saves money on interest charges.
- Have a little fun. If you can afford it, why not have a little fun with your refund this year? Maybe you want to take a road trip with your friends, maybe you want to save towards a vacation or maybe you just want to spend it on something you’ve been eyeing but haven’t been able to afford. Sometimes a little splurge good for the soul. If you DO decide to spend a little bit on yourself, make sure to have a plan so you don’t end up running quickly through your funds with nothing to show for it.
- Set it aside for a rainy day. A lump sum of cash is a great way to start an emergency savings fund. If you recently dipped into your savings or haven’t had the chance to start saving yet, now is a perfect time to rebuild or start your emergency savings fund. Life happens, and we just never know what types of emergencies can pop up. It’s always nice to have a security blanket so you don’t need to get into debt over an unexpected event.
- Help others in need. Giving to charity is always a good idea. If you support a local charity, or have a cause that’s close to your heart, sharing all or part of your tax return money to help them out is very generous. Many of us can’t always afford to donate as much as we would like to with our regular paychecks, but if you’re expecting a tax refund, now is the time to give to your favorite charitable cause.
- Invest for your retirement. I think it’s safe to say we all want to stop working some day. Unfortunately, that won’t happen magically. If you want to secure a financially stable retirement, investing during your working years is the best way to make it happen. According to Mint, using your tax return money to invest for your retirement is money well spent. “Even if you have a 401K through work, you can open your own individual retirement account (IRA). This long-term money management is something you’ll thank yourself for when you’re older.”
- Fix that leaky tap. If you’ve been meaning to renovate your home, but haven’t had the money to do so, now you do. Home renovations or upgrades can be expensive, and your tax refund is a great excuse to finally repave your driveway, fix the leaky kitchen faucet or upgrade your bathroom.
There are so many ways you can spend your tax refund -- the key to success is to have a plan for what you want to do with your money, and then stick to it.
The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out, and stay out of debt. For a free debt analysis, contact us and find out how we can help.