If you find yourself frequently living paycheck to paycheck, the thought of filing your taxes comes with either fear or relief; fear if you owe money and relief if you’re getting even the smallest refund. Though getting a refund is nice, many taxpayers don’t plan how to make the best use of extra funds, and in reality, it’s necessary to have a plan. Read on for three savvy tips on using your tax refund.
Spring for Needed Repairs
Many people avoid car mechanics like the plague for one simple reason: they fear that they won’t leave without dropping a few hundred bucks. If it’s been awhile since you’ve had your car thoroughly inspected, do yourself a favor and pay for a trip to the mechanic you trust. If you aren’t sure where to go for good service and a fair deal, try visiting GarageFly.com to locate trusted, reputable body and repair shops.
It’s important that you maintain your vehicle’s mechanical health now so it will last until you’re financially prepared to buy a new one; otherwise you may find yourself buying a new one because you were careless with oil changes and maintenance services of the like. If the mechanic finds a minor repair or two, apply the money from your tax refund toward it. Your safety is worth the investment, and having reliable transportation is important for every aspect of your life. This is also a good time to think about the other assets in your life. If anything else requires repairs, it may be time to handle everything now.
Invest in Worthwhile Purchases
When you can’t fathom the money it may cost to handle bigger ticket items like a new washer or replacing the old carpet in your bedroom, you rationalize that it can wait. Some, maybe even most, home repairs really can wait. But others are central to your safety.
If you’ve put off something like getting a new roof, consider using your tax refund to tackle this important renovation. Living under a roof that is dilapidated, not secure or otherwise damaged can put you and your family at risk. Investing your tax refund in repairing or replacing the roof with one that has leak barriers, attic ventilation and lifetime protection is a wise choice that increases the value of your home and peace of mind. Consider other major purchases you’ve put off due to a lack of funds and if there are any truly important ones (like a new roof), put your return to use there.
Downsize your Debt
A prudent financial decision is to put this money toward paying down your existing debt. Personal finance guru Dave Ramsey recommends following what he calls the “Seven Baby Steps” that promise to help you get past debt and build wealth. The second baby step in his series suggests that you pay off all debt using the debt snowball method. This approach starts with paying off the smallest balance you have, and then move on to the next smallest and so on. If you’ve amassed a significant amount of debt, there’s no better time than the present to start knocking out that principal. By using your tax refund to destroy debt, you’re empowering yourself to save money (by avoiding further interest accumulation) and heading toward a more sound financial journey.
It’s appealing to use your tax return for some fun, but avoid the temptation to make hasty purchases. Instead, apply your best judgment and make decisions based on your real needs. You’ll walk away with a little more will power, and the pride of knowing you’ve made an impact on your financial future.
