What You Should Use Your Tax Refund On
Most people dread tax time, but if you know some of your hard-earned money is coming back to you, it may not be so bad. After all, that refund is a nice little addition to your personal financial situation. But what do you do with it once you get it? Take a look at some smart — and not so smart — ways to spend you tax refund.
Saving your tax refund may not be the most fun and exciting option, but it's definitely a good idea. The financial site Money Crashers recommends having at least 6 to 8 months of your salary saved up for your emergency fund, so depending on how much you pay in taxes, you could be off to a good start. Look for a savings account that earns interest, and try adding a little of your paycheck to it each week or month, even if it's just a few dollars. Before you know it, you'll have a comfortable cushion in place in case you run into an emergency situation.
Pay Off Your Debts
After saving your money, paying off your bills is probably the next least exciting way to spend your tax refund, but you'll be thankful you did when you no longer have to deal with that credit card balance you ran up. If you have more than one debt, choose the one with the highest interest rates to pay down first.
Make Home Improvements
If you own your own home, you know there's always something to fix or improve. Consider spending your tax refund on that. Spruce up the yard with new landscaping, upgrade that washing machine, or replace those light fixtures to help save on your energy bill. Maybe you want to remodel the bathroom. Use your tax refund as your starting point.
Buy Something You Need
If you have your heart set on going shopping with your tax refund, try to stick to items you truly need. Maybe your refrigerator is on its last leg, or your kids are outgrowing their shoes faster than you can afford to buy them. Perhaps you've been avoiding a medical procedure or buying a new car part because you didn't have any extra cash. Whatever it is, make sure it's something you or your family will use.
What Not to Do
Unfortunately, it's all too tempting to spend your tax refund on something fun and frivolous. If you already have an emergency savings account, you're debt free, your home is in great shape, and you don't need anything, then it is fine to splurge. But few people actually live that reality. Don't use the money to treat your family to a huge meal at an overpriced restaurant, don't use it to buy a trendy designer outfit, and don't upgrade your smartphone when the old one works just fine. And while you may want to spend the money on a trip, definitely make sure it's an affordable one.
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