If you're one of the lucky people who expect a refund instead of a big bill come tax time, you probably don't mind so much when tax season rolls around. That extra influx of cash is generally something that you don't plan for-- so getting it every year can seem like a cause for celebration. But it's important to remember that your tax refund is your money. So getting a big bang for your refund bucks should be a priority.
Looking at a nice-sized tax refund this year? Put it to the best use you can! Whether using it for practical purposes or just to have a little fun, read on for some great ideas for the best way to spend your refund windfall.
Practical Uses for Your Refund Money
Set aside some emergency money.
When times are hard --like now, when many people face an uncertain employment future-- it's a good idea to set up (or add to) an emergency fund. If some unforeseen emergency arises (you lose your job, have to pay a hefty medical bill, or the pipes break and flood your basement), a nicely stocked emergency fund may just be your family's saving grace.
Make an extra payment.
When you have an outstanding loan on your home or for a car or other pricey possession, you know you're not just paying on the principal-- you're paying all that interest as well. The quicker you get your home or car paid off, the less interest you'll pay over the lifetime of the loan. With your mortgage, any extra payment is paid directly on the principal of the loan. And that means using your tax return for an extra payment or two will give you plenty of savings over time.
Pay off some credit cards.
If you struggle financially from month to month, it's a good idea to resist using your tax return for a treat and use it to help make those months easier, instead. If you have a lot of credit card debt, chances are it's really bogging your budget down-- interest rates can range from 10 to 30%. Using your extra cash to pay down the amount owed (or, even better, pay it off) is one of best returns you can get on your tax refund investment. Not only will it lower your payments, but it will also lower how much interest is added to your balance each month. Even if you want to use your tax return for other things, getting your credit card debt paid off should be a priority.
Fun Uses for Your Refund Money
Go on a vacation.
Springtime can be a great time to start planning a summer vacation. If you don't need it right now, why not use your tax return for your vacation instead of letting it simply sit in your bank account? Sure, it won't collect interest for you if you spend it... but there's a lot more to money than making it multiply. Sometimes you should be allowed to have a little fun!
Can't go on a vacation this year, or need a little extra time to plan? Put your tax return aside and set it up as a vacation fund. Then it can collect interest for you and still be there when you want it.
Redecorate a room.
When you want to make a change to your home, the cost can always seem like a real hit to your budget. But using your yearly tax return to upgrade your home can give you, over time, the home you've always wanted without having to feel the expense. Each year, make a small change or buy something new. In a few short years, your home might not even be recognizable.
Upgrade an appliance.
Does your tortoise-slow computer struggle to even load your internet dating profile? Then perhaps it's time for an upgrade. Whether upgrading your computer or buying a new refrigerator, investing your tax money in a useful new appliance can be practical as well as fun. In fact, when buying something like a new, more energy-efficient washer or refrigerator, you'll be saving money on your monthly utility bills as well as getting something you want. You can be practical and have fun... it doesn't always have to be one or the other.
