10 Smart Ways to Spend Your Tax Refund

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$networks is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel.php on line 208

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$is_shortcode is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel.php on line 211

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$post_data is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel.php on line 324

Deprecated: Using ${var} in strings is deprecated, use {$var} instead in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/utilities/SWP_Post_Cache.php on line 816

Deprecated: Creation of dynamic property SWP_Post_Cache::$post_id is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/utilities/SWP_Post_Cache.php on line 94

Deprecated: Creation of dynamic property SWP_Post_Cache::$share_counts is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/utilities/SWP_Post_Cache.php on line 937

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$shares is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel.php on line 365

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$permalink is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel.php on line 518

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$classes is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel_Trait.php on line 879

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$attributes is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel_Trait.php on line 859

Deprecated: Creation of dynamic property SWP_Facebook::$html is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/social-networks/SWP_Social_Network.php on line 394

Deprecated: Creation of dynamic property SWP_Twitter::$html is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/social-networks/SWP_Social_Network.php on line 394

Deprecated: Creation of dynamic property SWP_Pinterest::$html is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/social-networks/SWP_Pinterest.php on line 281

Deprecated: Creation of dynamic property SWP_Linkedin::$html is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/social-networks/SWP_Social_Network.php on line 394

Deprecated: Creation of dynamic property SWP_Buttons_Panel::$inner_html is deprecated in /home4/watchfu4/public_html/wp-content/plugins/social-warfare/lib/buttons-panel/SWP_Buttons_Panel_Trait.php on line 838

Tax season is upon us. As of writing this, there’s about two months left before April 15th which will be here before we know it.

Now, do you know yet if you’ll be getting a refund? Or do you owe anything?

I know I would rather get a refund. In fact, I’m sure you do too. This year, we got a refund that was a couple thousand dollars.

Now, that’s a nice return to receive. And when we get a sizable return, we might react foolishly by buying a bunch of stuff that doesn’t really benefit us. It’s so enticing to spend it all on things we want instead of things we need.

I also know that sometimes we don’t know how to spend the money wisely. But spending it foolishly gets us nowhere. We usually regret our purchases later, knowing we could have used that money more wisely.

So, here are ten ways you can use your tax return wisely.

 

 

10 Smart Ways to Use Your Tax Return

 

Emergency Fund

This is probably one of the easiest and is necessary. Everyone should have at least $1000 saved up for emergencies. If you can have more, that’s even better.
.
When surprises arise like a car accident or your refrigerator dies (both happened to me in the past month), you’ll have the funds available for those unfortunate times. And when your next emergency arises, you’ll be thankful you have it.
.
If you’re looking for high interest rates, check out Ally Bank. I’ve used them in the past when I needed to manage my dad’s funds before he passed away and was very pleased with them. Check out their site for current interest rates on savings and CD accounts.

Invest

This one scares a lot of people especially when you don’t know what to invest in. My husband is a CPA and he advised to start with a no load mutual fund. A good one to start with is the Vanguard Total Stock Market (VTSMX). We’ve invested with this mutual fund for almost ten years and have seen some incredible growth (upwards of 20% for the year) from it.

Retirement

Everyone should be saving for retirement, no matter their age. The earlier you can start, the more you’ll have when you retire. Most times, if you work full-time, your employer will offer a 401K. Sometimes, an employer will contribute an amount or match what you’re putting in up to a certain percentage. If your employer offers this, make sure you’re taking advantage of it. That’s free money into your 401K.
.
Another option to think about is an IRA. There are two types of IRA’s – Traditional and Roth. Here are the differences.

With a Traditional IRA, money goes in tax-free (directly from your paycheck before taxes are taken out) and you pay taxes when you withdraw the money at retirement age.

In a Roth IRA, tax is already paid on the money that goes in (you add money on your own, not from your paycheck) and it grows tax-free so any money withdrawn at retirement age is not taxed. With the Roth IRA, there are guidelines in regards to your income level and how much you can put in each year, so check on that before you start.

Check here for more information on both IRA’s.

Child Education

Consider starting a 529 Plan for your child. A 529 Plan is used for educational purposes for your child. When your child is ready to use it, they won’t pay taxes on it. They can use this money to pay for anything to do with their education.

Credit Card Debt

Ever hear of the snowball effect? Dave Ramsey termed this to mean you pay on your smallest balance first. As that gets paid off, you use that payment on the smallest balance and start applying it the next smallest balance.

This continues by paying your minimum payment on each balance in addition to the payments from the balances that have been paid off. For example, if you are paying on a balance with a minimum payment of $50, once that’s paid off, you’ll take that $50 payment and apply it to the next balance. If the payment on the next balance is $100, you’ll now pay $150 on that balance.
.
Just keep working in this way until all of your debt is paid off. This is very effective if you’re disciplined. But you have to use every remaining payment.
.
To get a good head start, put your tax return on your smallest balance.

Related: Start Living Your Life by Getting Control of Your Spending
Related: 9 Ways to Stop Overspending

Student Loans

If you have student loans, this might be a good option to use your tax return. You should consider your interest rate though. If your interest rate is low, you may want to leave it alone. Besides, the interest that you pay over the year is deducted off your taxes so keep that in mind.

I suggest looking at your interest rates on your credit cards and if they’re higher, you’re better off applying extra money to your credit cards than your student loans.

Vehicle

Depending on your situation, you might want to put this towards buying a new car or saving it up for your next car. The more money you can put down on the vehicle price will lower your monthly payment.

 

Mortgage

There’s a trick that if you make two extra payments a year, you can pay a 30-year mortgage off early by up to seven years. So use your tax return as an additional payment (not part of your regular monthly payment) and it will be applied directly to the principal (not the interest).

If you can keep doing that year after year, you’ll pay your mortgage off quicker.

HSA

This stands for a Health Savings Account. If your employer offers this benefit, you might want to consider it. You can build up a savings within this account and use it for doctor visits, prescriptions, and any other healthcare. It could be beneficial as you retire as you might have a generous savings for your healthcare needs.

Caution: Deductibles are high so you’ll want to do your homework before signing up for this option. It’s not for everyone.

Reward Yourself

Sometimes, we just want to take some for ourselves. Just be careful and don’t use the whole amount. You worked hard this past year and you deserve something fun for yourself. Take half or an amount you’re comfortable with and go on a mini vacation or do something you love. Have a little fun with the money you got!

 

Final Thoughts

Of course, it’s tempting to spend all that money on something fun but then you aren’t getting ahead of the things that will have a larger affect on your finances long-term. Consider that before you do something you’ll regret.

Instead have a little fun but spend the rest of the money wisely. You’ll be thankful later that you did.

 

Tell me – what do you plan on doing with your tax refund?

 

DON’T FORGET TO SHARE OR PIN THIS FOR LATER!