Getting a tax refund can feel like winning the April jackpot. But how do you spend your winnings? It may be tempting to look at this fun money as a new wardrobe, expensive dinner, or other splurge. Here are some ideas on how we can utilize our tax refunds for the greatest gain, and still have a little fun.
First, take care of your needs – and of course these are different for each person. Start by paying off some of those big bills with highest interest rates first. If you have credit card debt or student loans, this is the perfect time to put a little extra towards those amounts. Next, look at those monthly bills with lower interest rates such as your mortgage and car payments. Not only does paying more now help to pay them off quicker, it saves you future money in the form of saved interest payments. It is always a good idea to get ahead now on these payments. You will be set when there is an emergency and you need to take a month of from making payments.
Second, start an emergency account in a separate savings account. Even if you don’t add to it for several months, at least it is started and there in case of…..well, an emergency. If you haven’t set up a retirement fund, now is a great time to do so. Set up an IRA or see if your employer has a matching retirement account. If you already have an emergency account and retirement account, adding a little money from your tax refund will be a big help towards the future.
Third, look towards those expenses that you may be putting off but know need to be taken care. Many people avoid making medical and dental appointments because of their fear of the price tag. Now is the perfect time to schedule those appointments and take care of YOU! Just like us, our cars need TLC that often gets avoided because of cost fear. Maintaining your automobile will save dividends down the road. This is a great time to get that noise looked at, before it becomes a bigger noise! The same can be said for our homes. Ignoring a leaky roof or a dryer that doesn’t really dry? Here is the opportunity that you’ve been waiting for!
Finally, we come to the category of fun ways to spend this money….a trip of a lifetime. If you’ve been living paycheck to paycheck, this might fall more under the need category. Enjoy it!
The best advice for spending that refund is to spread it around. Most Americans receive close to a $3,000 return. In this instance, the money can be split with $500 to credit cards, $500 to student loans, $500 to car payment, $500 to emergency or retirement fund, $500 to yourself $500 to vacation. Putting a little money towards each of your big expenses and still pampering yourself is a great way to enjoy your winnings!