IF YOU’RE EXPECTING a tax refund this year, you need a good plan for your money. Always remember that the government isn’t sending you a bonus check – it’s money that should have been yours all along. In fact, if you’re receiving a huge refund, you’re probably having too much withheld. Be sure to revisit your W-4 form and adjust your federal income tax withholding allowances.
Getting a refund check sometimes feel like winning the lottery - a very small lottery. Just like lottery winners, it’s easy to get caught up on all the things you will want to have right away, and before you know it, you’ve already spent more than your expected refund - in your mind. Don’t get caught treating your refund check any differently than you’d treat your weekly or monthly paycheck.
Give the money a purpose. By the way, don’t just let it sit in your checking account because before you know it, it will all be gone through your routine expenses such as entertainment, bills, shopping, and much more. Before you know it, you’ll have nothing to show for the refund. You should think about your personal financial situation first and figure out how you can help yourself. Find out what your needs are, not your wants. The following are some ideas on what to consider at least when you have money coming your way - by the way, this can apply to any incoming extra cash other than tax refunds as well.
1. Increase your Emergency Fund
Wait, you mean I should have an emergency fund? Yes, you do. Without an emergency fund, one little financial surprise or bad news can send you on a debt spiral to financial disaster. Everyone needs to work on having an emergency fund. it is usually recommended to have at least six months worth of savings in an easily-accessible interest-bearing account. It could take months or even years to store that much money, but only if you’re relying on your paycheck. that’s when your tax refund money can help. Dedicate to boost your emergency fund every year that you get a refund. Soon enough, you will have an account ready to work for you whenever you need it; a little bit of financial peace.
2. Pay off High-Interest Debt
Credit cards are evil, that’s the whole story and there’s no other way to put it. As soon as you realize that fact, you will learn to stay far away from these evil little plastic monsters. They will eat your financial stability with their High-interest rates. Once your emergency fund is established, the next thing to do with your tax return money is to kill - I repeat kill - any high-interest debt that you have. Put your refund to work by creating a debt elimination plan. Work from the high-interest debts to the lowest ones. By the way, we’re not just talking about credit cards; this includes your car loans, student loans, house loans; briefly, anything that you owe and need to make a payment to a creditor.
3. Spend it on a Special need.
Life isn’t easy. Everybody got a list of wants and needs. Focus on your current top level need and use your refund to take care of it. Having car trouble that forces you to miss out work? Do you have a medical need that you have to take care of? Well, this is your opportunity to do so. Health comes before everything. Fix yourself and then you should be able to take care of everything else. The whole key point is to use it on what you really need.
4. Start or boost your Business
Do you have an idea that you think will make a good business? Have a hobby? Well, you should consider starting a business using your refund money. It’s a great opportunity to put your money back to work and take control of your life. By the way, the same money used to start a business could qualify for more tax deductions next year too.
5. Spend it on Something You Want
Ok, what’s the point of saving money, killing off debts, or starting a business if you don’t enjoy life? So, here we go: if you have taken care of the above suggestions and still got money to spend, go for it; you deserve a treat! Spend it on something you’ve always wanted. treat yourself with a nice vacation, a luxurious watch, or a nice dinner at an expensive restaurant; just don’t spend more than you actually can afford. Enjoy the gift from God: Life.
In conclusion, there are many ways to spend your tax return money, and you should take a moment to plan out how you will spend it before you watch it vanish in useless life problems. It’s a big deal, and it’s your Money; not the Government money. so, spend wisely and don’t forget to be generous.