Best things to do with your tax return
Best things to do with your tax return
Next to death, the only other guarantee in life is taxes. Yes, it is tax season once again and that means a potentially fat check coming back to you in your name. It is exciting to get money back from taxes, but the best thing to do is to have a solid plan for your money this year.
Remember, this is not a bonus check, this is money you already earned that the government owes back to you. Try to treat your tax refund as a regular paycheck. You can make some great advances in your finances if you choose to use this money wisely.
Pay Off Debt
Being an adult means doing things like paying off debt. However, getting out of debt can be both relieving to your bank account and good for your credit score. Having a great credit score means having access to the best credit cards and loans when you need them.
Now, you don’t need to use your entire tax refund to pay off your debt, but you can choose to make a bigger payment towards a credit card bill or make an extra payment on your student loans. Maybe you are just a few car payments away from owning your vehicle outright. This could be the perfect time to get ahead and out of debt much quicker.
Also, keep in mind that you should focus first on your higher interest debt. Compare what your interest rates are on your credit card vs. your car loan, etc. You should work to pay off the higher interest first.
Add to Your Emergency Fund
Do you have an emergency fund? Having a savings account or extra funds on hand is important to cover yourself in case of an emergency. Do you know what you would do if your pet needed an emergency surgery or if your car broke down right now? Would you have the cash to fix it?
Many people do not have the cash on hand or an emergency fund plan. It is in your best interest to get one started or add to it. You can start small and have a plan to add each month to this fund so you are covered.
Buy That Thing You Need
Perhaps you are holding off on that new winter jacket, a tune up on your a/c unit or dental work that will eventually be necessary to get. Stop procrastinating and get it done. Carve out a portion of your tax refund and get that one thing you need.
Make a Home Improvement
If you own your home, a tax refund could mean updating a bathroom or getting the yard finally landscaped. Investing in your home is always a good idea. Your tax refund this year might mean you can get a home remodeling project finally completed.
Your tax refund could also be used toward purchasing an energy efficient appliance. Old, outdated and inefficient appliances are not only frustrating to use, but they are likely adding to your energy bill. Change out an appliance and save the rest of the year.
Put it Towards Retirement
Did you know that 1 in 3 Americans have less than $5000 put aside for retirement? That is a super scary thought. There are a lot of things holding back many Americans from stashing away for retirement. The cost of living seems to continue to climb and many people don’t even know how to get started.
This year, you can start building your retirement account by using your tax refund. This will be a super easy way to dump some money straight in and then work to automatically get money from each paycheck in your retirement account without having to touch or look at it yourself. Besides your tax refund and your paychecks, try adding money to your retirement account any time you get a little extra cash (i.e. from a garage sale or birthday money).
Make a Donation
Giving to charity is always a heartwarming experience. While it might not be on your immediate list of priorities, it can be a great societal benefit. Many people choose to donate a portion of their tax return. Consider a charity or non-profit that speaks to you and will be put to good use. Also keep in mind that any donation you make will be a tax write-off.
The best things to do with your tax return are sometimes the most boring, but that is ok. Blowing your tax return on wants instead of needs will hurt you in the long run. Take a good look at your finances this year and make some tough decisions that will ultimately get you ahead in the future.