It’s that time the year again. The time to file taxes and wait to find out if you owe Uncle Sam or if you’ll be enjoying a tax refund. If you will be receiving a check back at tax time this year, you may be looking for smart ways to spend your tax refund.
We’ve gathered 6 smart ways to spend your tax refund wisely to build a secure financial future…. and maybe even have a bit of fun along the way.
Here are six smart ways to spend your tax refund
Pay off debt: An refund from your tax return is always a nice to have, but it’s not a guarantee. It’s never wise to structure your spending to depend on a refund because you have too much debt to deal with it in your regular monthly income. 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.
Set it aside for a rainy day: A lump sum of cash is a great way to start an emergency savings fund. If you haven’t had started saving yet, or your savings have been used for something necessary, now is a perfect time to rebuild or start your emergency savings fund. Life happens, and we never know what types of emergencies can pop up. It’s wise 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 some 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. As a bonus, most charitable giving can be deducted from your tax bill next year!
Invest for your retirement: It’s safe to say we all want to stop working some day. Unfortunately, that won’t happen without a plan. If you want to secure a financially stable retirement, investing money early and often 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 What’s Broken: If you’ve been meaning to repair or make needed renovations to your home, but haven’t had the money to do so, now might be the right time. Home renovations or repairs can be expensive, and your tax refund is a great excuse to finally repave your driveway, fix the leaky kitchen faucet or make needed changes.
Have a little fun. If you do it wisely, there’s nothing wrong with having a little fun with your refund. Maybe you want to take a road trip with your family, maybe you want to put some towards a night out with your significant other, 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 is 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.
There are so many smart ways to 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.