Four Ways Not to Waste Your Tax Refund
If you’ve already filed your taxes, you must be looking forward to the refund check hitting your bank account. It’s also possible that the money has already been deposited, and you’re letting it sit there while you decide what to do with that hefty balance. It’s easy to get excited at the prospect of tax season, because it means getting a relatively large sum of money back – likely when you most need it. But if you aren’t sure what to do with that windfall, or you want to be smart about the use of it, then here is a list of ways you could spend or save your tax return money so you don’t wind up wasting your refund.
Catch up on Bills
Did you only pay the minimum balance on your last credit card bill? Did you let your internet and car bills sit on your kitchen counter for a few too many weeks? If so, the first thing you should do with your refund money is to catch up bills. This should be non-negotiable. Past due bills are the worst thing for your credit record, and are especially bad if it’s something like electricity or rent. If you think you might be past due on bills, go check each and every one of them to ensure they’re paid in full or paid as much they can be. You should never let yourself get too behind on essentials, but if you had a bad month (or couple of months), your tax refund should be a welcome relief.
Pay Down Debt
Similarly, if you’re holding onto a large sum of credit card debt, tuition debt or any other kind of debt, make a payment. It doesn’t have to be for the whole amount, particularly if you’re dealing with debt that requires monthly payments. But, maybe you make an extra payment the month after you get your refund, or you finally pay off the balance of that one credit card you maxed out years ago and have been slowly paying it down ever since. Using your refund to help yourself out of debt is another useful way to not waste your refund. Similarly, if you borrowed money from a friend – whether simply for a dinner or something bigger, like a car repair for which the mechanic overcharged you or you let your roommate cover some of your rent portion during a bad finance month – pay them back as soon as possible.
Replace Something that Needs Replacing
Maybe your computer has been slowly dying for months, your coffee maker hasn’t quite been making the best coffee or you’ve been wearing a hole into one of your favorite work shoes. Whatever it may be, use this tax refund to replace an item in your home or your everyday life that you just keep telling yourself you’ll get around to replacing but never do. It will be a nice, small treat for yourself that does not feel too extravagant. We shouldn’t make too much of a habit out of shortchanging ourselves during everyday life because, for one, where’s the fun in that, and for another, you will slowly drive yourself crazy. But, something simple like making sure you own a functioning coffeepot or treating yourself to a new PC is worth the investment. So, using some of your refund to fund a replacement is a fantastic way to not waste the money you get back.
Fund a Savings Account
It is always, always, always a good idea to keep money in a savings account. It can be your designated emergency fund for unexpected charges like a trip to the vet or to the mechanic. The refund can even be your dream fund for buying that house one day, or finally going back to school. A tax refund can also be a fund to keep a couple months’ worth of rent in case you lose your job, or it can be a savings fund for your children (or future offspring) to go to college. Whatever it may be, have an account for it, and try your best to put money into it when you can. If you’re in a good enough place when you get your tax return, put most or all of it into your savings account. Or, if you have to do any of the aforementioned productive tasks with your refund, put money towards those, and then put whatever is left into your savings.