It's always nice to come upon some extra money even if it's money owed to you from taxes. Getting a refund this year with your taxes? Well, if you haven't received it yet, you're in luck because I am going to remind you of some smart ways to put it to good use. It's always so tempting to go and splurge and treat yourself to new shoes, a fancy dinner, and maybe even concert tickets but wait! Putting it to good use in a way that invests in your future is IMPORTANT so consider these 6 ways to use it instead.
Put it in an Emergency Fund.
Like I've said before, numerous times, an Emergency Fund is a great way to have $500-$1,000 on hand in case of an emergency so that you don't have to use your regular savings or any credit cards. Without an Emergency Fund, it's going to be extremely difficult to pay off debt and stick with a budget. And I always tell everyone do whatever you have to do to fund your Emergency Fund so that you can move on to the next financial goal you have. So this is a GREAT way to knock out this step quickly.
Pay off debt.
My post about how to pay off debt explains how to create a debt snowball by paying only the minimum payment on all debts except the smallest. You want to add any extra money you can to your smallest debt each month so that you can pay it off and move on to your next one. So as long as you have a fully stocked emergency fund you should next use it for paying off debt. Using a lump sum like your tax return to pay off debt can get you MANY steps ahead so that you can move on to your next financial goal.
Use it for your regular savings fund.
A regular savings fund (different from your Emergency Fund in that it should NEVER be touched except for a life altering situation like loss of a job) should have 3-6 months worth of living expenses in it. When your debt is paid off and you have your Emergency Fund in place, throwing all extra money into a regular savings fund is a brilliant investment. A regular savings fund can be used after a natural disaster, loss of a job, loss of a loved one, etc.
Pay off more of your mortgage principal.
Did you know that if you have a conventional mortgage, many lenders will let you make a lump sum payment on your principal and then they'll recast your monthly payment based off the lesser amount you owe on your mortgage now. There's generally a small fee but it's something to look into so reach out to your mortgage lender and see what they can do for you. Some people choose to refinance or just make a basic lump sum extra payment on their principal so they can pay their mortgage off quicker.
Invest it. If you have everything else above in order, consider looking into ways to invest your tax return. You can look into a money market account, especially if you have a credit union, or add it to your existing investment accounts. Reach out to your bank or find an investment solution that works for you.
Use it for a big IMPORTANT purchase.
I know I told you not to splurge but you can still splurge if you use it wisely and already have taken care of the first 3 suggestions above. Say you need new windows, a new roof, or some major home improvements. Your home is an investment so using your tax return to make some big changes and repairs is a smart investment.
How are you going to use YOUR tax return this year?
Use it for a big IMPORTANT purchase.
I know I told you not to splurge but you can still splurge if you use it wisely and already have taken care of the first 3 suggestions above. Say you need new windows, a new roof, or some major home improvements. Your home is an investment so using your tax return to make some big changes and repairs is a smart investment.
How are you going to use YOUR tax return this year?
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I always try to break even so we don't receive much of a refund or money due. If we do get a refund we put it into savings.
ReplyDeleteWe are using are refund to get 12 new windows in are house. Which is much needed.
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