Some of you reading this have probably already gotten back your return. Those of you who got a refund: have you spent it already? A tax refund can be a blessing that can help you get out of debt or prepare for future financial hardships. Here’s some “do” and “don’t” advice regarding tax refunds.
Spending with an expected return
Buying time-saving devices such as machinery or equipment that allows you to maximize the number of projects that you can do on your own rather than outsourcing or even paying retail can affect the amount of dollars you spend throughout the year. Additionally, personal improvement spending such as a gym membership can see returns in other ways that can help you live better, longer, and happier.
Keep your future in mind
Investing in stocks, mutual funds, IRAs, CDs, and other investment mediums will allow your money to accrue interest. This is not only a way for your money to make you money, it keeps your money from being spent on unnecessary purchases. That way, once the next tax season rolls around, you will already have a nest egg and can use the new return for more wants than needs.
It’s all in the timing
I don’t know about you, but when I think I’ll get a refund, I check the mail every day for my W-2. Some are so impatient to get their refund that they will take their tax documents to a cash advance place that will fill out their taxes for them (for a fee) and give them their refund almost instantaneously (for a fee). These fees can add up and cost you serious dollars that could be saved just by waiting the 10 or so days it takes to get your refund back electronically (if you e-filed). A little patience goes a long way in this case.
Paying off past debt
This is a great idea as far as spending your refund! It helps your credit and keeps you making payments. Just remember to start with the highest interest debts first. Credit cards and other unsecured lines of credit usually have the highest interest and should be paid off first. Other debt such as car loans, student loans, and mortgages should be lower priority.