Millions of taxpayers expect refunds each year. Taxpayer often start making plans in anticipation of receiving that refund. Too many people are ready to spend their refunds as soon as it hits their accounts. Usually, there is some excitement around getting a refund. But let’s not forget why we get refunds. Refunds are generally received because taxes were overpaid during the previous year. Don’t think of it as free money or a raffle winning. It is neither of those two scenarios. Overpaying taxes is basically loaning the government interest-free money. If you spend that money, it’s like losing the value twice. You don’t want to do that! We offer a few suggestions for your tax refund.
1 – Start/Supplement an emergency fund. Most experts say it should be between 3-6 months of your expenses.
2 – Pay down debt. Having debt can handicap reaching financial goals. High interest rate credit card debt is often the culprit. Get rid of that debt.
3 – Start/Build savings. We routinely encourage our readers to start saving any amount at regular intervals. However, a tax refund is a nice lump sum boost to any savings plan.
4 – Invest in your home. Is there anything your home needs? Programmable thermostat? Energy efficient appliances? Any home improvements that will enhance your home’s value?
4 – Fund your retirement. Do you have a traditional or a Roth IRA? Do you contribute to your 401(k) plan?
5 – Invest in yourself. Is there a class, conference or training program that will enhance your skill set, making you more marketable?