It’s tax season time; for some a dreadful time, for others a time that extra cash comes their way. If you will be getting a tax refund this year, the only question you will be asking yourself is what will you do with that money?
How can you use that money wisely? Keep in mind that there are only 2 things you can do with a tax refund, spend it or save it. One action will get you ahead, the other will put you behind. Learn about ways to use your refund money that will benefit you financially.
What Will You Do With Your Tax Refund?
Spend It|Get Behind
Spending your tax refund money is okay as long as you do not create more debt in the process. If you create debt by spending your refund money, you are putting yourself behind financially. You will be paying interest on the debt plus you may have to pay fees on the debt. A wise decision would be to spend your tax refund money only if you do not create debt.
If you waste your money buying things you want vs what you need you may feel good for a while, but you are still financially behind. Remember that the next time you go to the shopping mall.
Save It|Invest It|Get Ahead
Invest In Yourself
Pay Off Your Debt:
Get out of debt. Paying off your debt is a way of investing in yourself because you are saving money on the interest that you would be paying to the credit card company, mortgage or auto loan company.
You are investing in yourself by not wasting your money on interest and fees.
Invest:
Add to your current investments. If you do not have an IRA or 401k account, open a new account. Money you invest today will increase many times over by the time you retire. Investing your tax refund money is investing in your future.
Build An Emergency Fund:
If you do not have a 6 month reserve of money, you need to build up a Rainy Day Fund, or an Emergency Fund.
Financial experts strongly recommend in good or bad economic times that everyone have a 6 month supply of money ready to dip into for unknown, unexpected emergencies.
If you have a Rainy Day Fund, make sure you use it just for emergencies. You should not rely on the money in this account for everyday use, that is not the purpose of the account. Use the money if you lose your job or your car unexpectedly needs a large repair; a non emergency would be your child needs lunch money.
Improve Yourself:
Take a self-improvement class, maybe a work related class or an investment class. If you learn about financial topics you can improve yourself before next years tax season, and save even more money by the financial decisions you make.