Who doesn’t love a large check or bank deposit that doesn’t come earmarked for a specific purpose? Your tax refund may seem like a gift from the government, but it is actually a return of your own money. For the upcoming year, consider adjusting your withholding so that you keep more money in your pocket throughout the year. Your next tax refund won’t be as fat, but you will benefit from maximizing your take-home pay all year long.
For now, how will you use your tax refund from last year’s income? This guide will suggest eight ways to put that money to good use.
1. Prepare for Emergencies
When financial expert Dave Ramsey established his Seven Baby Steps for financial stability, he decided that the creation of a $1,000 emergency fund was more important than all other steps. This means he considers an emergency fund more important than eliminating debt and paying bills.
If you receive more than $1,000 in your tax refund, you could easily establish this fund without struggle. The goal is to keep this money to ease the financial struggles that may hit unexpectedly in the year to come.
2. Save for the Future
Think about adding to your retirement fund or throwing some extra money into your child’s college fund. This is a good time to consider any type of investment that may lead to greater financial security in the future.
3. Invest in Your Future
Could you advance your career by securing a higher educational degree or completing a certification course? Have you been dreaming about going back to school so you can switch to a more rewarding career? Now is the time to invest in your future, whatever that may mean for your life. Your tax money could even serve as the seed money for a new business venture that eventually allows you to quit your day job.
4. Eliminate Debt
Go to www.annualcreditreport.com and print out a copy of your report from all credit bureaus. List your debts from the smallest to largest obligations and start paying them off. If you have just one or two substantial debts, contact the companies or collection agencies and ask if they will offer you a lower settlement amount in exchange for an in-full cash payment.
5. Upgrade Your Lifestyle
Consider upgrading your home appliances to energy efficient models that will reduce your monthly bills. Perhaps you can trade your old SUV in for a hybrid car to save on gas charges. Would you love to turn your spare bedroom into a home office? You can quickly burn through your tax refund when you start making home improvements, but those improvements can increase the value of your home and will make your living space more comfortable.
6. Invest in Your Health
How many times have you said that you could look and feel healthier if you had a personal trainer or could afford a private chef? Your tax refund gives you the money you need to pay upfront for personal training sessions or a year’s membership to the local gym. You can also buy Zumba classes, home fitness systems or healthy cooking lessons with your tax money. Now is the time to eat your words and get healthy.
7. Invest in Your Loved Ones
Have you ever felt helpless as someone you cared about struggled financially? As fun as it is to buy luxuries for yourself, it is often even more fun to help someone you love dig out of a difficult situation. Whether you help someone pay for their final quarter of college or allow your daughter to join that expensive All-Star cheerleading squad, there are always people around you who can use a bit of help.
8. Have a Little Fun
Go shopping and splurge on something you would otherwise never think of buying. What about that Coach purse or those dynamite heels at the mall? Do you want to visit that outrageously expensive restaurant or spend a weekend at a luxurious hotel? You may also plan a family vacation for the upcoming year and pay for it in full right now.