Best Uses For Your Tax Refund

Do you spend weeks each spring eagerly anticipating your income tax refund? When the money finally comes in, is it gone tomorrow?

You’re not alone. Many consumers view tax refunds as unplanned bonuses. In their minds, the money is a gift from the government, to use for splurges or treats. They don’t consider how they might put the refund to better use.

Whether or not you are in need of debt relief, a tax refund provides the opportunity to improve your financial situation. The credit counselors at Clearpoint Credit Counseling Solutions offer these tips on how to get the most value from your refund check.

  • Pay down your debt. Refund checks usually arrive when many consumers are still struggling with holiday bills. Use your refund for some much needed debt relief. Pay off your credit card. If you have an outstanding balance on more than one credit card, you can either try to pay off the lowest balance card first for motivation or direct the funds toward the card carrying the highest interest rate (wiser from a strictly financial perspective). Or, apply your refund toward other debts, like a car loan or a home equity loan.
  • Consider your financial goals. Are you trying to save for a down payment on a house or car? Do you hope to contribute to your child’s college tuition one day? Consider applying your tax refund toward these goals. If you don’t yet have a set of short-term and long-term financial goals, put one together. You’ll be more conscientious about how you spend your refund or any other extra money that comes your way.
  • Save for a rainy day. Why not give yourself an even bigger return on your tax refund by putting the money into a savings account–or an emergency savings account, CD or retirement fund? Your tax refund will continue to grow if you put it into savings or invest the money. Plus, it’s always helpful to have a savings account to draw from when a major car repair bill, medical emergency or other unexpected expense comes along. That way, you don’t have to borrow money and add to your debt-load.
  • Keep things in perspective. Working your way out of debt can seem like a daunting task. Perhaps you assume that a small tax refund check won’t make enough of a dent in your debt. Think again. Every little bit helps. Paying down debt takes time, but steadily increasing your monthly payments does have an impact. Just stay focused on the end goal. It may take years to pay off your debt, but your ultimate reward — being debt-free — will be well worth the effort.
  • If debt is a continuing problem. Certified consumer credit counseling agencies can assist people who are facing financial challenges and are looking for debt relief. Clearpoint’s credit counselors can help educate you on responsible money management, and teach you how to make the most of your hard-earned income. Clearpoint also offers strategies to free up funds so you don’t overpay your monthly tax withholdings. If you’re having problems paying down debt, Clearpoint’s credit counselors will work with you to develop effective strategies. If necessary, they can enroll you in a debt management program.
  • If you’re well off. Even if your finances are in good shape, your refund check provides the opportunity to improve your life or the lives of others. Use the money to spruce up your home (replace the siding, stain the deck, etc.) or make it more energy-efficient (buy a new heater or replace drafty windows). You could improve your career opportunities by taking a class or training course. Use your refund to teach your older children how to handle money. Give them a portion of the refund and help them budget for school, clothing and entertainment expenses and savings. Finally, you may want to donate your tax refund to a worthy charitable organization. You’ll help improve the lives of others, and your charitable gift may reduce next year’s tax burden.

Remember, you work hard for your money and you deserve to enjoy a healthy financial lifestyle. Put some thought into how you use your tax refund. Making smart financial decisions is not always easy, but it will definitely benefit you and your family over the long term.