Saturday, February 16, 2013

Smart Things To Do With Your Tax Refund

You are getting a tax refund! I bet you are excited. You have a list of things you are going to do with that money, too. Maybe some clothes shopping, a concert, a new flat screen TV, or even a spring break vacation. That all sounds nice. How much of an impact will those items make on your future? You do want a secure future right? I know I do.

There are some very smart things you can do with that tax refund. If you only get a small refund, you can pick one, if you are getting thousands back, you might pick a couple.

Get current with your creditors. Some people get behind in making timely payments to various creditors. Utilities are common, as are rent and mortgage payments. Food, electricity and shelter are are always the first priorities of any family. If you are behind on these types of payments, use your refund to get current with your creditor. Make sure to get a receipt showing you are current for your records. You will feel so much better knowing you have a secure place to call home, and the lights will be on when you return home.

Pay off or pay down debt. You high interest debt is squashing your future. Every time you make a payment to your loan or credit card, you pay interest. A little portion of those hard earned dollars are owed to someone else. Don't you want to keep your money? The quicker you pay down the debt, the sooner those payments are yours to keep. There is a calculator at that can help you figure out how long it will take you to pay off your debt.

Save for an emergency.  A somewhat large percentage of the population does not have any money set aside for an emergency. That means living paycheck to paycheck. You have heard of that right? Another set of the population sets money aside on a regular basis for emergencies. When an emergency happens, the money is there to be put to use. No credit cards or loans from friends are needed. If you don't have an emergency fund at all, start with your tax refund. Add $10 a week or more and don't spend it, unless it is an emergency. Many financial advisers suggest a minimum of 3 months worth of expenses in an emergency fund. I highly suggest it be in a separate bank account than your spending money.

Invest for retirement.  I know way too many young people you don't think about saving for retirement. The power of compound interest is on your side if you start investing when you are young. The money will have so many more years to grow if you invest at age 20, than if you wait until even 30 to start saving. A minimum of 10% of your income is suggest, but if you can only start with 1% then do that! Many mutual fund companies have minimums for investing, which makes large tax refunds a great place to get an account opened. You don't have to add more to it right away, if you can't, but I suggest you do!

Invest for college. This could be your own college fund, or one for your kids or grand kids. The more cash you have for college, the less student loan debt you will have to take out. Investigate different types of college accounts and get started.

Invest in you. You might have some awesome skill that could bring you side income or full time income, but you lack the requirements. This could be equipment, instruction or professional advice. It's time to take your large refund and invest in your abilities.

We are using our refund of $442 to pay down the balance on our truck loan. We are almost to the end, so it feels good to put every last dollar we can find towards that loan. What will you do with your tax refund?

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