When it comes to tax refunds, I’ve heard a few things from folks over the years that have raised a few eyebrows. At least for me. While I tend to think in terms of saving and having future finances taken care of, some folks prefer to simply live for today and worry about tomorrow later.
This of course is related to the question of “what to do with a tax refund?” Now, whether or not you actually get a refund or not can depend on a few factors. To me, it helps to maximize chances of doing this by hiring a pro to do my taxes. But however you handle tax preparation, you just might end up with the need to figure out what you’re going to do with a refund. It’s a nice problem to have, compared to the alternative of having to pay an amount due when finishing your return.
Of course, a look at tax rates by country indicates that the U.S. may not be so highly burdened compared to many other countries – despite a lot of complaining and hand-wringing over annual tax filings. Regardless, if you’re fortunate enough to be getting a refund, there are a bunch of good things you can do with it. And, of course, other things that can be avoided.
Here are 5 Things to Do With Your Tax Refund:
Pay off Debt
If you’re getting money back, why not apply it to existing debt? Being in debt stinks, and can really hold people back from achieving life goals and having the quality of life one wants. Instead of paying interest on big balances, why not take a tax refund and make a dent in your debt? This particularly makes sense with higher-interest debt.
Save for Retirement
As we all should know, we can’t be sure that we’ll be able to work until old age. Thus, it’s important to take retirement planning seriously. Every little bit helps, and we just might be thankful later in life that we set aside some money from way back when as a younger person. Ultimately, when you retire may or may not be under your control, but you’re responsible for the quality of that retirement when it does happen.
Investing money is an important part of personal financial planning. We can save money, as noted above, and that is of course vital. However, if we actually plan to invest money, we just might see this money grow to something quite a bit more significant. Rate of return is important, as we know. So, making a smart investment can be a great way, in many cases, to utilize a tax refund.
Enrich Your Kids’ Lives
By this, I don’t mean just handing them money! Rather, I mean spending it on their education or extracurriculars that can help them develop and grow as people. Investing in your kids can be a great way to put them in a little bit better position to succeed in life. Kids are a noble use of funds
Generosity can be a great thing, and there are certainly many ways one can show this. Of course, giving money or time can be very personal, and what works well for one person might not work as well for another. If it’s possible to give money – or preferable to time, anyway – a tax refund might be a viable source of funding.
As for What NOT to do with your tax refund, there is one thing that comes to mind: splurging. Now, of course life is to enjoy – and we should do so every day. Life is short. That being said, why not take care of actual needs first? When I have heard people talk about taking vacations with tax refunds, or buying TVs, etc – I just don’t get it. Maybe I need to lighten up about such things, and frankly I don’t judge people negatively who do splurge. It’s just that I prefer to apply funds to things I perceive as bigger needs.
My Questions for You
What have you done in the past with tax refunds?
Do you have any other suggestions or comments to add?