For many people, this is a great time of year, knowing that your tax refund check will soon be on its way to you. The thought of free money coming your way is always exciting. But, this isn’t free money. It’s your money. Money that you earned and the government’s been holding for you until now. And soon, they’ll be sending it back to you. What will you do with it?
It’s tempting to spend it on something fun and frivolous, but since it’s really your money that’s being returned to you, treating it as an extension of your budget is probably the smarter thing to do. There are so many things that a big, lump sum of money can help with.
Give your money a purpose. There are several options you can use the money for that can help improve your financial picture.
Pay Off High-Interest Debt
If you’re carrying credit card or loan balances with a high-interest rate, the longer you hold on to that debt the more money you’ll end up paying. Use your refund for debt elimination and come up with a strategy for paying off loans or consolidate them. Any of your loans that have a high-interest rate should be included in your plan – high-interest student loans, car loans, other personal loans, or credit card debt.
Make Home Improvements
Your home is your biggest asset, take care of it. The more you take care of it, the better off you’ll be when you’re ready to sell. Are you in need of a new roof? How about installing energy-efficient appliances to lower your utility bills? Home improvement projects can significantly increase the value of your home.
If you don’t need to make any major improvements, you can use your refund for other necessities around your home that can be costly. Do you need a new bed? Some new furniture? Have you been thinking about a big landscaping project? All of these can be expensive purchases that you may have been holding off on because you didn’t have all the money at once and didn’t want to go into debt to get them. Your refund check can help you with these big expenses.
Start a Retirement Account
If you haven’t started a retirement account yet, now is the perfect time. Use your refund to open an interest-bearing savings account, IRA, or investment account that will help you save for retirement. Starting your account with a significant deposit will help to encourage you to keep growing it.
Something You Need
Does your car need a major repair? Are you overdue for a doctor’s appointment and can’t afford to go? The extra money from your tax refund can help you take care of necessities like your transportation and your health.
Buy Life Insurance
If you’ve already taken care of everything else and still haven’t used your tax refund, or haven’t used all of it, a life insurance policy is something to consider. Most people overlook life insurance in their budget because they’re young and they think they don’t need it. But if you’re married and you have a family, a term life policy will ensure your loved ones are protected at a relatively low cost. For a few hundred dollars, your family will be able maintain their standard of living if the unthinkable happens to you.
With so many great options for your tax refund, isn’t it better to consider it an extension of your budget and using it wisely than spending on something you don’t really need?