There are some people that cringe at the thought of tax season coming up, but for many, it can be that bonus they’ve been waiting for all year. With the average tax refund being $2,860, it’s no wonder there’s so much excitement! But in all our excitement we need to remember that having a good solid plan for our money needs to be a top priority. Just like with any paycheck or bonus you receive, your tax refund will need to be properly budgeted for. Don’t get caught letting your tax refund burn a hole in your pocket! Instead, think about your individual financial situation, determine your needs, and come up with a list of smart ways to use your tax refund this year.
There are so many ways to use your tax refund to better your financial situation this year. Let’s take a look at 7 solid ways you can use your refund this year to feel confident and financially responsible.
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7 Solid Ways To Use Your Tax Refund
Pay Off Debt
Paying down your existing credit card debt is one of the smartest financial moves you can make. With average interest rates as high as 15% (and sometimes even higher!), paying off credit cards is an extremely smart way to use your tax refund this year.
You can use a free debt snowball calculator to visualize just how much that one extra payment would have an impact on your overall debt payoff plan. No joke, it can make a huge difference!
To better manage your financial situation, consider using a financial management software such as Personal Capital. Similar to Mint, Personal Capital is a FREE software that will allow you to manage all of your financial accounts in one place to track your cash flow, analyze your spending habits, view your bills, and track how much you’re saving. And it’s all for free!
Build An Emergency Fund
If you’re currently on a debt-free journey, make sure that you have a starter emergency fund in place of at least $1,000. Once your debt is paid off, experts recommend having an emergency fund of 3-6 months worth of expenses saved up.
Receiving your tax refund this year could be a great way to jump-start that emergency fund and have it really dialed in for when life throws you those little curve balls (you know, the kind that makes you think it can’t get any worse, then suddenly you run out of wine and it’s like the end of the f*cking universe?).
Again, to track your savings account and watch it grow, using a financial management software like Personal Capital can be incredibly beneficial to your overall finances.
Emergency fund in place + piece of mind = a less stressed, happier you!
Prepay for a Vacation
There’s nothing more rewarding than being able to pay for a vacation in cash. Take it from yours truly who got into debt in the first place from charging an entire vacation to my credit card (*insert a bazillion eye roll emojis here*). Believe me, paying for a flight you took two years prior is no fun. Don’t be that person.
Use your tax refund this year to cash-flow a vacation you’ve been saving up for. Who says being smart with your money means you can’t have any fun?
If you use your tax refund for a much-needed vacation, consider using Airbnb to save even more! You’ll save money on dining out (as most Airbnb’s will have a kitchen), parking fees, and in most cases, you can even negotiate the nightly rate. When you sign up for Airbnb you’ll receive $40 in travel credit which means more money in your pocket!
Invest In Yourself
Time and money spent investing in yourself are never wasted. That could mean taking a course that may be beneficial to your career or learning a new skill that you’ve always been interested in. Contrary to what many believe, an investment in yourself is not selfish. Unlike most investments, investing in yourself is never a risk because it will always pay off in the end. #truth
Car or Home Maintenance
More than likely your refund won’t be large enough to pay for that kitchen remodel but consider some basic home or car repairs that are likely to save you money. For under $1,000 you could replace an inefficient appliance, patch that tire that needs fixin’ or seal that leak in your roof. For more ideas, check out these 6 home projects that save energy and money.
Buy Some Good Karma
Can you think of a better money management practice than sharing your wealth with those less fortunate? If you can, let me know in the comments because I can’t! Donating some or all of your tax refund to charity is a great way to show some love to a cause that’s close to your heart. Just don’t forget to save your receipts so you can itemize your deductions next year!
Alright, alright. If your financial goals are taken care of, then I GUESS you can go ahead and splurge a little. (I said a little, missy!) We work hard all damn year. And if you’re just like me, you look forward to that refund hitting your bank account. There’s nothing wrong with responsibly treating yourself to something you’ve been eyeing, as long as you know where to draw the line.
The most important thing to remember when you receive your tax refund this year is to have a plan. This shows that you’re responsible and that you take your financial situation seriously. When you give your money a purpose you’re setting yourself up for financial success. If you’re smart about it, your tax refund can work for you to improve your finances. And yes, that even means treating yourself a little bit!
Leave a comment below and let me know what you plan to do with your tax refund this year!