Many people are busy filing their taxes and talking about what they are going to do with their tax refund. There was a lot of talk on the internet recently about a mom who used her refund to pay her rent for one year with her $5600 check. This single mom said instead of buying the latest sneakers or fancy electronics, she wanted to pay her rent for a year so she had peace of mind that her and her children have a roof over their heads.
If you are expecting a refund check, how will you spend it? Will you treat yourself to something that will make you happy or will you use it for something that will improve your financial situation?
Whatever you decide to do with your refund, you should give it some serious thought. What are the things you really NEED? What are some things you Want? How can you make it work for your family? If you sit down and make a list of those things, you will have a clearer picture of what your priorities are. Let’s take a look at 9 Smart Things to Do with Your Income Tax Refund.
1. Replenish Your Emergency Fund-Did you need to dig into your emergency fun over the last year or two? If so, consider putting your refund to good use and build that fund up. By having that safety net, you can avoid going into high interest credit card debt if you have sudden or unexpected expenses.
2. Put it Toward Your Kid’s College Education-Talk to your bank about setting up a tax free college fund account for your children’s education. College is expensive and student loans can plague graduates for life, here is a way you can help ease that burden for your kids.
3. Invest in Your Retirement Account-Add it to an existing IRA account or start one with your check. This kind of account allows you to withdraw the money tax-free during your retirement.
4. Pay Off Credit Card Debt-If you are carrying balances on your high interest credit cards, pay your balances off and close those accounts.
5. Pay Off Your Mortgage– Use your refund to help pay off your mortgage. Use it to make a one-time payment to reduce the principal you owe or lower monthly payments by using it for refinancing. You can also allocate it to help pay a portion of monthly mortgage payment through the year.
6. Invest It– This is not without risk but you can also reap big rewards by investing some to buy shares in a mutual fund or some stocks. Do your research and talk to a financial advisor so you feel comfortable with what you choose.
7. Pay for A Family Vacation-If you have been wanting to take a family vacation, consider using your refund to prepay for that rather than putting it on your credit card and paying high interest rates. If you plan ahead, you can take advantage of some great sites where you can find amazing travel deals that can help make your dollars go even farther.
8. Use It for Home Improvement Projects–Sprucing up your home with new paint, new deck or porch, paving your driveway, new kitchen countertops or backsplash and more can add value to you home and help you enjoy it more. Adding items that can help insulate your home better such as weather tight doors or windows can also save you money on your heating and cooling bills. Save even more by taking advantage of great sales and deals at stores like Home Depot and Lowe’s.
9. Give to A Cause You Are Passionate About– If you are fortunate enough to have your financial bases covered, consider donating to a cause or charity you are passionate about. You can deduct your contribution on your income tax return and it will go a long way in helping others and making your heart feel good.