Savvy Ways to Use Your Tax Refund
We’re in the middle of tax season once again, and tax day is April 17th this year. Filing your taxes can be stressful, especially if you aren’t aware of where to even start. To make things easier when it comes to filing you can follow these tips. Whether you do your taxes yourself online or hire an accountant, there’s another aspect of filing your taxes that you might forget about: your tax refund. If you’re lucky enough to get money back on your taxes, you don’t want to spend it all without realizing. Knowing how to spend your tax refund can be tough, so it’s important to prioritize and make a plan of what to do with your new-found money.
First off, it’s crucial to not spend your tax refund before you get the check. While you may be anticipating a few thousand dollars, wait until it gets into your bank account. You don’t want to be spending money you don’t have yet. A lot of people make the mistake of treating their tax refund as a bonus and wasting it on something trivial or just putting it into their checking account to use as extra money. Remember: this tax refund is not just a $20 bill you found in your coat pocket. You want to be sure to use it wisely.
It may seem practical and boring, but the best option for spending your tax refund is to save it. You should always have at least $1,000 in your emergency savings fund, so if you don’t already have one, use a chunk of your refund to build one up. It’s never too early to start thinking about retirement, and you want to start saving as soon as possible. Put part of your refund into retirement savings so that you’re on track for retiring when you want to.
Another great way to use your refund is to make an extra payment on your mortgage, which could help you pay it off sooner. Debt can be a stressor for a lot of people when it comes to their finances, so pay off high-interest debts, like your car loan, your student loan debt, or your credit cards. If you're nearing retirement yet still have student loans, you can potentially save money by choosing to refinance, so look into your options here. Refinancing your loans with low-interest lenders allows you to control your payments, make extra payments when needed, and save a lot of money in the long run. Having less debt is always a good thing, and you’ll be able to use your tax refund to make an extra payment whenever you want.
Although you definitely want to save a good portion of your tax refund, using some of that money for something that makes you feel good isn’t necessarily forbidden. Use a small portion of the refund and treat yourself to a night out, or book a vacation you have been wanting to go on. Use some of the money on your family’s groceries, or to buy a new TV. If you feel bad spending the money on yourself, take $100 of your refund and donate it to your local food bank or your favorite charity.
There’s no doubt that this time of year is taxing, but there are ways to make it a little less agonizing. A tax refund is a good thing, but you don’t want to waste it. Don’t make any rash decisions, and think things through before spending the money. And if you’re ever in doubt when it comes to your finances, don’t be afraid to ask for help from a financial advisor. It’s always better to be informed when deciding what to do with your money if you’re unsure.