It’s that time again! You have done the hard part, which was to get all of your tax information together and file it. The days of worry are over as all you have to do now is sit and wait for your return to come to your door. You are probably thinking of a whole bunch of ways you can spend it, depending on how much it is going to be. There is certainly something you’ve been eyeing for some time and now is your big chance! However, there might be a better course of action this year when it comes to your tax return – save it!
You might be thinking, “Awww, that’s no fun!” But actually, saving your tax return can be a lot of fun down the road. And that is what you should be thinking about – your future.
When you receive your tax return this year, put it towards yourself. Don’t get rid of it on things you don’t need that are not important beyond today. Invest your return in yourself. If you need a bit of guidance of what that means, then consider the following recommendations:
Put it towards your debt
There are few things as unfun as having debt. Whether you have a lot or a little, it does you no good by hanging there above your head. Putting some of your refund toward eliminating a good chunk of that debt is a great idea and will benefit you greatly. Bob Burger, financial planner with Murphy Capital Advisors LLC, spoke with Turbo Tax about why using your tax return to eliminate current debt is so
“A tax refund is real money!”
important. In fact, he compared it to gambling. Sure, you just got a handful of money, and you have an itch to go spend it on something entertaining. However, the responsible thing to do would be to put it toward your outstanding debt.
“The way they see it, that first $1,000 is mine,” Burger said. “The second $1,000, that’s Vegas’s, and I can do all kinds of crazy things with it because that was never my money in the first place. I fear the tax refund is no different.”
Burger makes a great point, in that the tax refund is a sort of bonus to your budget. Chances are you haven’t been budgeting for your tax return all year, since it wasn’t money you actually had. Now that you have it, you can spend it without upsetting your budget. On the other hand, you could eliminate debt and get ahead on your budget. Eliminating debt will free up your other income, as you won’t be using so much of it a month to pay down debt.
Either start or add to your emergency fund
If you have no existing debt, then congratulations! That is a big step and one that you should certainly celebrate. However, don’t celebrate your tax refund away because you don’t have anything to put it towards. Instead, put it into your emergency savings fund, if you have one. And if you don’t have an emergency fund, then you should use the money to start one, according to The Simple Dollar.
Having an emergency fund is a nice pillow to leave yourself for the future should something unfortunate happen. Whether there is a natural disaster or you run into vehicle problems, financial problems occur more often than people like to admit. Having an emergency fund will not only help you with these problems as they arise, it also prevents you from falling back into debt. If you have a financial disaster and don’t have savings or an emergency fund in place, you are going to rely on credit to keep yourself afloat, which means more debt. Stay debt free and have a fund in place to protect you against whatever may come your way.
Advance your learning
Another great option for your tax refund is to invest in advanced learning. Whether you want to take business classes to earn a promotion in your career, or you simply have an interest in a topic and want to study, a tax refund could be a helping hand, according to Bankrate. Investing in additional schooling demonstrates to employers that you are dedicated, hardworking and going to put in the extra mile for education and career opportunities.
“Many continuing education courses start at just a couple of hundred dollars,” Steven Katz, spokesperson for TransUnion’s financial management website, told Bankrate. “Invest in your education and you’ll have more earning power in the future.”
This doesn’t mean you have to enroll as a full-time student in a graduate program. There are many universities and colleges that offer online courses. Take one or a few depending on your time, and build your credentials and experience.
You know the difference between wasting money and investing it in your future. With a tax refund, people tend to go purchase trivial things that may be fun, but are hardly worth the same as eliminating debt or setting aside an emergency fund.
Additionally, you can split your refund up for several purposes. Maybe put a bit of your return toward your emergency fund and some toward knocking out debt? Whatever you choose to do, make sure you are bettering your financial standing for the future. A tax refund is real money, even though it feels like a quick bonus. You have worked hard for this money all year long, even though you only see it now. Don’t neglect the importance of the tax refund by turning it all into play. Be responsible and help yourself out.