If you are expecting a tax refund this year, you need a good plan for your money. Maybe you already have something in mind for your tax refund. Before that tax refund burns a hole in your pocket, remember the IRS isn’t sending you a bonus check, in most cases it is money that should have been yours all along. If you are receiving a huge refund, you are probably having too much withheld from your paycheck. If that is the case you need to adjust your federal income tax withholding.
Give your tax refund money a purpose. Don’t let it sit in your checking account. Think about your personal financial situation, and figure out your needs.
Consider these Eight Ways to Spend Your Tax Refund
- Start or Add to Your Emergency Fund
Without an emergency fund, one financial set-back can send you on a debt spiral to financial disaster. Most experts suggest you should have six to eight months’ worth of savings. Storing that much away might take months or even years if you are just taking a little bit out of each paycheck. Use your tax refund to start your emergency fund or make a significant deposit into your current fund.
- Pay Off High Interest Debt
The next best thing you can do with your tax refund is to pay off high interest debt that you are carrying. Put your refund to work by starting your debt elimination program of choice and paying off any payday loans, title loans, debt consolidation loans, high-interest private student loans, car loans, and of course credit card debt. If using your tax refund would only be a drop in the bucket toward paying off your high interest debt you might consider using the refund to pay a bankruptcy lawyer. Getting rid of all of your debt by filing bankruptcy may be the wisest solution, becoming debt free might be the best use for your tax refund.
- Spend It on Something You Need
Is your car in need of maintenance, does your home need repair, or have you put off dental work? You need to take care of household and personal essentials. Your tax refund can help you can cover these costs.
- Invest in a Tax-Sheltered Account
Use your tax refund to open a Roth IRA or 529 college savings plan. This small investment today can pay huge dividends down the road.
- Invest in a Taxable Account
If you have already contributed the maximum to your tax-sheltered accounts, consider yourself lucky and explore opening a brokerage account with a discount broker. Check out a mutual fund with conservative and diversified investments and low expenses, this may be a good choice, especially if you are not interested in actively managing your stock portfolio.
- Give to Charitable Causes
For most people this would probably be priority number one. But these days with so many people being on a tight budget, donating to charities can slip off your monthly budget. Your refund is your chance to give back. Using your tax refund to give to your favorite charity. This will benefit your community in a major way, and you can claim the tax deduction too.
- Get that Business Up and Running
Have you been looking for a little money to promote your home-based business? Do you have an idea for a business that you have wanted to start? You could use your tax refund to get your business to the next step. Turn your tax refund into income that will benefit your family for years to come. You can also take advantage of small business tax deductions.
- Spend It on Something You Want
If you made it this far and still have tax refund money left, you deserve to treat yourself. You’ve earned the right to splurge a little bit. Don’t feel guilty about using the extra money from your tax refund for a summer vacation, or to treat your family to a nice dinner. Don’t go crazy. Keep in mind that a $500 tax refund check is no excuse for a $2,000 splurge.
Contact The Law Office of Christopher German 720-675-8070 and become armed with the facts and details you need. You’ll be glad you did!