1. Emergency Fund
You never know what life is going to throw your way. When something unexpected does happen, make sure you're prepared. Make sure you have money tucked away to cover yourself should something unfortunate ensue. If you’ve been reading up on our blog posts, you know the recommended amount one should save is six months’ worth of expenses. Add up all your bills and multiply the total times six – there’s your goal. This is not an account that will accumulate overnight. This is a long term goal you can set for yourself, but adding a chunk of your tax return to this account definitely would not hurt!
2. Pay Off Debt
Let me introduce you to what I call the "Debt Cloud". This lil' guy is your shadow when you have credit card debt. He's quiet, and just looms over your shoulder. Maybe the Debt Cloud is hangin’ out with you as we speak. How great does it feel when that cloud is gone? Seriously, can he just leave already? It’s a great feeling to no longer have to make a payment on a credit card. I know for me personally, it’s amazing to have the feeling of freedom from debt! The average American balances around $5,000 in credit card debt. No Bueno. Use your tax refund to pay off some debt. Get rid of the Debt Cloud that’s been your constant companion for the past year. Say “Goodbye” to those monthly payments, interest rates, and credit card balances that never seem to diminish.
3. Add to Your Retirement Fund or Invest
It’s never too early to save for retirement. It’s never too late to save for…wait. It’s never a bad time to add to your retirement savings! If your current finances are in check, stash some money away for retirement. If you already put in enough money per paycheck into your 401(k) for your company to match, consider starting an IRA. An IRA allows you to have more control over your savings than a 401(k). The sooner you save; the better off you’ll be in the future. In addition to securing your future, consider investing your money in stocks or bonds. Choose to be risky and invest in stocks, or be conservative and invest in bonds. Another saving option is a designated college savings account. Earn a return on your savings by opening a Coverdell IRA and save for your kids or grandkids’ college education.
4. Maintenance, Repairs, and Home Additions
Tired of creaky wooden floors? Duct tape no longer working on those leaky pipes? If you’re anything like me…a swimming pool in the backyard will do. Okay, okay, maybe a little bit too extravagant. Take advantage of your tax refund and repair your house or manicure your yard. Save even more by becoming Mr. Fix-It for a day.
5. Save, Save, Save!
If you have an emergency fund already set aside, consider saving for an upcoming large purchase you see in your near future. Maybe you can add some of the funds to your Holiday Account. You can never do wrong when you save your money.
Fun?! Did she just list “Fun”? Yes, yes I did. There is nothing wrong with spending your tax refund on a family vacation or that swimming pool you’ve been dreaming of for years because you love swimming and reading a good book near the pool while drinking some iced tea…oh, am I talking about me again? Sorry, got a little bit distracted. Anyways, as long as your savings are in order – have FUN with your tax reFUNd! See what I did there?
7. Give to Others
You can never go wrong by using your tax refund for the greater good. Donate your funds to charities around town or use the money to help someone else in need. The return will never seem sweeter.