Have you ever gone to make a large purchase in March and get that question/statement from the cashier… You must have gotten your tax return? It can seem kind of offensive but at the same time, it rings true for so many. Many households are expecting a decent tax return. It is easy to consider this money “extra” and use it to buy things of more of a luxury item.
What if you decided to make this year different and use that tax return in more of a way that could benefit you in a longer term. Remember, your tax return isn’t really extra. This is money that was taken out of your paycheck. You worked hard for that money and now you can make it work for you.
Emergency Fund
Have you read my post about building an Emergency Fund? Your Emergency fund is what will prevent you from having to run to a credit card to pay for things that catch you off guard. If you were struggling to come up with the money to start it, this could be a great opportunity to fund it.
Pay Down Debt
Once you already have an Emergency Fund in place you can start to pay down some debt. Why have an emergency fund first? If you only focus on paying down debt but do not have any money set aside for unexpected expenses, you will more than likely end up using your credit cards. When you have money set aside for emergencies you can pay off those credit cards without having to add more to them.
If you have credit card debt, your tax refund can make a huge difference and save you a lot of money. The average interest rate on a credit card is 17.99% and costing you. Use your refund to pay down these cards.
Don’t have credit card debt? That is Amazing!! Look at other opportunities of items you can pay down. Even paying down a large amount on student loans, a car or a mortgage can make a huge difference in your debt to income ratio on your credit score.
Not sure what to pay down or first or what method is best for you? Check out my post here on what debt to pay.
Invest
I won’t speak specifics on investments because that is a whole other game. However, it can be a good idea to invest your money and allow it to grow. A lot of jobs offer investment opportunities like a 401K. There are banks that allow you to open high-interest accounts, and there are financial advisors that can help you get more information on what options are best for you.
Self-Growth
I am a firm believer that I do not know everything but I want to. There is so much knowledge available to us more than ever before. Is there something you want to learn? Perhaps you can sign up for some classes for something that interests you. There are also growth seminars you can attend if that is your fancy. Self-help books are abundant, and you don’t even need to purchase them if you opt for going to the library.
Retirement Fund
According to Northwestern Mutual’s 2018 Planning & Progress Study 21 % of Americans have nothing at all saved for the future. And it is not that we plan to work until we can’t, it’s just not a pressing thought. The problem is, it should be. We need to make our retirement a priority and start planning and investing in it. Using your tax refund is a great way to get a jump start on a retirement plan.
College Savings
It has been said, and I agree with it, that you should have a retirement saving before college savings for your child. Why? Because as bad as they suck your child can get student loans to go to College if needed. You, however, can’t get a loan for retirement.
If you have a good retirement fund going then using your tax refund for College planning could be a good idea. There are different options you can invest in to save for college. A 529 account is an option, but fees and benefits vary by state.
Getting your Money When it Helps the Most
If you are receiving a large refund, take a look at what you are claiming on your W2. You could be paying less in taxes throughout the year. That would mean your check would be a higher amount and more useful to you at the moment than waiting until you file a return every year.
What Will You Choose
I hope that some of these ideas can inspire you to look for ways to make your tax refund work for you. Yes, it would be fun to get a new larger TV, but really that joy will be short lived. How will you use your refund this year?
