How to spend your Tax Refund
It is that time of the year that you may be getting some money back from the government after you fill out your taxes. Do you have a plan for the money or do you like to add it to your checking account so you have extra money on hand for a while. Some people may want to take a vacation or go buy something they have been waiting for. I feel before you spend it you should think about doing the below items first:
Ideas for How to Spend your Tax Refund
If you got a refund back from your tax refund do you have a plan on what to do with the money. One thing to ask your self first is did I get to much money back. If you think you may have got to much money back maybe you should talk to a accountant or financial planner to possibly reduce the amount of taxes taken out each paycheck. I know some people like to get a larger tax refund to use as like a savings account. The down fall in that is the government is holding on to your money and not paying you any interest.
What is your situation
So what here are some ideas on how to spend your tax refund. I know every situation is different. If you have a Financial Planner it would be good to consult with them. 1. If you have Debt it may be best to pay it down. For instance if you have Credit Card debt at a high interest rate it would be good to pay the highest interest rate first. For instance if your highest Credit Card interest rate is at 14.99% why not pay it off first. It is like having the money in a Investment that pays a guarantee interest rate of 14.99%. It is tough to find a guaranteed rate that high and it is tax free. I would pay off the highest interest rate card first and then after the highest interest rate card is paid off then move on to your next highest credit card.
2. After your Credit Cards are paid off why not pay off other debt you may have. For instance if you have a car loan at 8.99% interest rate. Again it is a like a guaranteed interest rate. Plus the more debt you have paid off the less you have to bring home in wages. So if you decide you want to change jobs or if there is a cut back at your current job. Some people will tell you first you should have a emergency saving fund of three to six months worth of take home income so if you lose your job you have the money to fall back on to. I still feel paying your debt off first is the best way. Then you can always use your credit line if the worst happens and you lose your job.
3. After your debt is paid off it would be good to have three to six months of your living expenses put in a saving account to use in case of emergency. So that way in case you lost your job you be be able to pay your living expenses until you got a new job.
4. If you don’t have your IRA maxed out or a Roth maxed out why not then add to them. If you don’t have a Roth started possible look into starting one. You can ask a Financial Planner to see if it would be the best retirement plan to invest in.
5. Do you have kids? If you do maybe check into starting a college fund for them with the money you get from your tax refund. Check into a 520 college savings plan with a bank or financial planner to find out the benefits of it. I know if you have kids I am sure you love them as much as I love mine and want to be able to help them out with their college if you can so they don’t start off their adult life with a lot of debt. But before you do make sure you have your debt paid off and your retirement plan stable. Because you need to be able to show you are stable financially to your kids.
Debt, Savings or Donations
Some people may say it is better to Donate more instead of investing your tax refund. I still feel it is important to get your Financial life stable. You should get your debt paid off, your emergency savings fund set and then take care of your retirement funds and kids college before donating it away. What are your thoughts? What do you feel should be done with the Tax Refund? I hope this blog can grow with input from others who have a strong desire to help people out with there Finances. Please send me any future information or topics that can help others.
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