5 Smart Ways To Use Your Tax Refund

Are you counting down the days until your highly anticipated tax return arrives in your bank account or mailbox? Have you considered what you will do with your return once it arrives? While visions of vacations and shopping sprees may dance around in your head, it’s important to put some serious thought into how you’ll use your tax refund in wise ways. Otherwise, you’ll be amazed at how quickly it can disappear without you even realizing it.

Here are five smart ways I suggest you consider using your tax refund so you can make the most of the money you receive back from Uncle Sam.

1. Pay Off Debt

You should all know by now that I’m a huge proponent of getting out of debt as quickly as possible. Since your tax return is kind of like an “extra” paycheck, why not put it straight toward your outstanding debt? This is especially smart to do if you’re currently living paycheck-to-paycheck and have a difficult time paying down your credit card or school loans. Your tax return gives you the perfect opportunity to finally make a dent in your debts.

2. Put It in Savings

If you don’t have much or any debt, congratulations! You’re clearly putting a lot of thought into your fiscal health and are taking the steps necessary to obtain financial independence. You can put yourself in an even more desirable financial situation by putting your tax refund directly into a savings account. If COVID-19 taught us anything, it’s that the unexpected can happen at any time. Having a decent savings account will help you deal with lost wages, inflation and unexpected health expenses.

3. Boost Your Retirement

I’m already retired, but for those of you spring chickens who are still working, keep in mind that retirement is right around the corner. It tends to sneak up on you, so it’s important to do what you can now to prepare for that day. Your tax refund can be used to boost your retirement and help you live more comfortably when you’re a senior.

4. Fix Up Your Home

Do you have a furnace that you know is on its last leg? Or maybe your shingles are looking worse for wear and you know you’ll have to replace them soon. If you have big home projects looming in your near future, why not use your tax refund to take care of them? It’s better to take care of expensive projects when you know you have the money. If you spend your tax refund on unimportant things and then develop a roof leak next year, you’ll have to figure out how to come up with the money you need to repair or replace your roof. When that day comes, you’ll probably regret not using your refund to take care of your home project needs.

5. Treat Yourself

If you’ve lived wisely, are debt-free, have a nice emergency fund built up, and don’t have any pressing home projects to take care of, feel free to have a little fun with your refund. Just be responsible about it. Instead of blowing your entire refund on the most expensive television you can find, consider using it to fund a reasonable vacation that will help you create memories with the people you love.

Of course, I’m not your dad, and I can’t control how you spend your money. But if you take my advice and put some thought into how you’ll wisely use your tax refund dollars, you’ll be happier in the long run. It feels good to be responsible with your finances, especially when it puts you in a more stable financial situation now and in the future.

Patricia Magee - May 18, 2021

Keep up the good news,
Cheers,
Pat

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