Will you receive a tax refund this year? Think before you spend it!
Let’s be truthful. Getting a tax refund feels like a boon, so it feels like you should blow it on something fun. What's on your wish list–a new TV for your family room or a mini vacation for you and your spouse?
However, we all know that it would be best to spend that money on things you and your family actually need. Let’s look at some smart ways to spend your tax refund this year.
Smart Ways to Spend your Tax Refund
Pay Off Debt
First things first. If you have debt (especially credit card debt), use your tax refund to pay it off. If you can’t pay it all off, pay off as many small balances as you can.
This will clear up more money to spend on your higher balances each month. Whether it’s credit cards, your car, or medical bills, paying off debt is a great way to use your tax refund.
Open an Emergency Savings Account
Another area that should be addressed is an emergency fund. If you have money left over after paying off your debt, but don’t have an emergency savings account, use the money to open one.
If you don’t have any debt, but don’t have an account – put all the money into opening and funding an emergency fund. This will prevent the need to use credit in the future when emergencies happen.
Make Extra Mortgage Payments
If you don’t have any debt and already have a healthy emergency fund, use the money to pay down your mortgage. In most cases, you won’t be able to pay ahead on your payments, but you can make one large payment that will actually go towards your principal.
Make your regular payment that month and then make another payment. This ensures that the entire amount goes towards the principal.
Pay Ahead on Bills
You can also pay ahead on bills. For example, did you know you can pay extra on your electricity bill and the overage will be applied to your account for future months?
You could also go ahead and buy a year of service with your cell phone provider if you use a company like Straight Talk.
Do Home Repairs
Last, but not least, if you want to invest in something that will lead to a return, do home repairs. Kitchens and bathrooms always see the biggest return on investment.
However, if you have an old roof or windows, those should be your top priority. Get more ideas on my Home Improvement on a Budget page.
While it might feel good to blow your tax refund on something fun, that feeling won't last long! Instead, consider making one of these smart choices so you can feel good about it for years to come.