If you are one of the people getting a tax refund this year, consider yourself very lucky. You probably have visions of spending and more spending of your windfall. Before you go all crazy, it’s a good idea to really consider your actions before you act. While you may get a temporary high from spending, the hangover effect might not be so pretty. Here are 3 great ways to spend that money that will only benefit you in the end.
3 Great and Enriching Ways to Spend Your Tax Refund:
- Replenish your reserve. This is a great time to boost your emergency fund back to where it was. Conventional wisdom says you should have savings equal to at least 2 months of living expenses to cover your needs in case of emergency, like job loss or healthcare costs. I’ve seen recommendations of up to 6 months of reserve, but that might be unattainable for most people. If you don’t already have one, now is a great time to start one. If you’ve used some of the money, it is also a great time to replace used funds. The peace of mind that this brings is immense. Having a good overall picture of your financial wealth is essential.
- Pay off debt. This is a no-brainer. If you are sinking in bills and can relieve some of the burden, then you definitely should do that rather than blowing all the dough on some useless stuff. You could use the funds to reduce or eliminate credit card bills. Perhaps you have upcoming bills such as home/car insurance. You could opt to pay it as one bulk payment rather than spread it out over months. This frees up more money at the end of the month. Best part, you don’t have to worry about that particular bill for another year!
- Live a little. This is an unexpected one isn’t it? Just like all work and no play makes Jack a dull boy, all full on adult “responsibility” makes for a restless and ultimately unhappy person. Sometimes, in our quest for frugality, we forget to pamper ourselves. Don’t deny yourself. Use some of that money to do something for you. A budget vacation doesn’t have to be super expensive. Watch out for vacation deals. Lots of deals can be had when you know where to look. Try sights like airfare watchdog, my favorite Skyscanner or marvelous Secret Flying for great deals that won’t break the bank. Treating yourself every once in a while doesn’t make you a bad person. In fact, it might just be the prescription for much needed motivation to save anew. Any money leftover can be put towards the first two.
If your refund is very high, it might be a good time to take a look at your deductions. You might want to adjust your W9 so that your take home pay is higher. While getting a big check is awesome, it also means you are essentially giving Uncle Sam an interest free loan for the year. You don’t want to do that if you can use the money.
Have you filed your taxes yet? Or are you like me waiting till the last minute because l am not due a refund? How will you spend your money? Will you do any of these 3 great things with your tax refund money?