Friday, April 8, 2016
Will you be getting a tax refund this year? Rather than loosing track of it in your checking account or spending it all right away, why not try one of these ideas. Down the road, you just might be glad you did.
Get Rid of High-Interest Debt
If you're currently carrying a balance on high-interest debt like a credit card or payday loan, using your refund to pay off some or all of that debt off can save you thousands in the long run.
While high-interest debt can be a quick and easy way to get by in the short term, carrying a long-term balance on these credit products will have a serious (and negative) impact on your finances.
Start an Emergency Fund
The extra cash from a tax refund is a great source of funds to jump-start an emergency fund, if you don't already have one. Whether it's unexpected car repairs, home maintenance, or a medical emergency, you're more likely than not to run into an unplanned expense this year. Building up an emergency fund with your tax refund is a smart way to get ahead of those financial pitfalls.
Get a Will
If you've been procrastinating hiring an estate planning attorney to draw up the legal documents you know you need to take care of, now is a good time to move forward. Having a current will, revocable living trust, power of attorney, and advance directive documents may cost up to $2,500, but the peace of mind you'll have makes this a good way to invest your tax refund.
Treat Yourself, Within Reason
Maintaining balance between saving and spending is difficult, but never spending money to treat yourself or your family can actually make it harder to save. The key is to determine how much of your refund will go to leisure purchases in advance. Before you spend a dime of your tax refund, make a plan for where the money will go. For example, you might put 80 percent of it toward your debt and other finances and spend 20 percent on yourself. Another strategy is to immediately divide your refund by 12. That gives you the amount you can spend each month and can remove some of the temptation to splurge.