Tax season is in full force and whether you are finally scrambling to get documents together to file in time, or you have already submitted and are one of the many that are waiting for your refund to arrive, there will be plenty of ways to put your refund to use, both good and bad. Your tax refund can be a significant amount of money, so it important to put it to its best use, maximizing its value over time instead of living in the moment.
First the best…
Pay Off Debt
If you currently are carrying credit card debt, I am sorry to disappoint you, but you will need to take that refund and send it immediately to pay down (hopefully pay off) the debt you are carrying over each month and wasting money on interest. Depending on the interest rate and balance that you carry, you should be throwing hundreds of dollars a month away on interest, that could be used to build your future savings.
Build an Emergency Fund
While this is separate to your nest egg, you should be able to have access to ample amount of money in case a medical bill, auto repair, or appliance replacement comes up. This way you will be able to pay cash and not put on a credit card and continue to sink you deeper into debt. Experts say that you should have at least six months’ worth of expense reserves to cover even an unexpected job loss, to not ruin you if you need a few months to find a new job.
Complete Home Renovations
With everything that occurs in our daily life it can be hard to come up with extra money to do some needed upgrades around the house, so using your tax refund might be a great way to put money back into your house that will add value to see a return when you go to sell. Depending on the amount of your return, if you are able to redo a half bathroom, update landscaping, or even repaint rooms, it could go a long way.
Take a Vacation
Now it may seem hypocritical to say to spend on a vacation, but life is all about experiences as well, so if you are in a good financial place in your life when it comes to no debt, you have an emergency fund built up, and you now have the extra money to have a much-needed break from reality, then a vacation may be a perfect way to escape with your new-found money.
Now to the worst…
Leave in a Checking Account
When your refund is deposited to your checking account, it will not do any good just sitting there. For one, you are likely to spend it if it’s there, but even if you do leave it alone, it is not growing with interest at all, so instead invest in an IRA/retirement account that can grow with compound interest each year and provide some security when you are ready to retire down the road.
Blow on Impulse Purchases
While you have the money, you may think you need a new TV, wardrobe, or go out for a fancy dinner, and while it is important to take care of yourself, especially if you have been financially responsible, blowing your refund will not giving any long-term gratification other than leaving you with an empty wallet and items that you will probably get tired of in a short matter of time.
Receive a Gift Card
For many of us, our returns will be delayed this year, but there are promotions offered where you can receive the money back on a gift card, even getting above and beyond your planned refund just for taking advantage. For one, a gift card just means you will spend it, and most likely on things that you do not need, so wait the extra couple weeks and have the money deposited into your account so you can put it to good use.
The absolute worst…
Take to the Casino
This option may sound like a lot of fun, and it will be, but only for a brief moment in time when you feel like a baller, putting it on black, or spinning the slot machine wheels, until you start to see your stack go down, and pretty soon you’re leaving the casino empty handed and you wonder how much that really was. Save yourself the disappointment with the certainty that you will most-likely lose everything before you go home.