It’s that time of the year again and you’ve been pretty diligent with your taxes, so you find yourself with an extra $2000 on your hands and you start wondering what to spend it all on. People often get confused when they get a relatively large sum of money and end up spending a good chunk of it without really knowing where the money went. Well, spending your tax refund might be pretty easy, but it if you want to use this money wisely I suggest you take a look at some of options listed below.
1. Pay off school loans
Student loans can affect your life plans and even your partner’s plans for that matter. These loans can never be discharged, even in bankruptcy, and if you delay paying, your tax refunds can be seized, wages garnished and credit ruined. Of all the debt you may have to pay, student loans should take top priority. For young married couples, the problem can be doubled if both have student loans. Even if you are currently single you’ll want to pay off your student loans as quickly as possible, so you can move on with your life and worry about more important things.
2. Enhance your child’s college fund
It’s never too early to start thinking about the future and when it comes to giving your child the best education you can afford, it’s good to start planning well in advance. A thousand dollars can be a nice starting point and help you get the ball rolling, so to speak. Check out your state’s 529 plans.
3. Put it in your savings account
Putting money into a savings account allows you to have peace of mind. When faced with potential problems and emergencies you will feel a lot less stressed out if you know that there are a couple of thousand dollars sitting on your account. Major home or car repairs, injuries, or an infestation in your home can come at the worst of times ,and having that little extra money saved for rainy days will reduce your stress immensely.
4. Focus on big ticket buys
Instead of frittering your tax refund away on a bunch of insignificant things that will be gone or unwanted in a short time, you can focus on investing in some big items that will last, like a new fridge, a big screen TV, a new car or even a gaming console for your kid (or yourself). These purchases are good investments since you use them every day and they will last a long time.
5. Take a bite out of your credit card debt
When it comes to debt, an extra $1000-$2000 can really help you move forward and start that debt-destroying tactic you’ve been trying to implement for a while. You’ve probably already discovered that paying just the minimum every month doesn’t reduce your debt by much, if any. Paying off a smaller debt first and then moving on to the next one until everything is paid off is a sound tactic, but with this sudden boost to your funds, you can focus on high-interest debt first and take a huge chunk out of it, saving yourself hundreds or even thousands of dollars of interest in the long term.
6. Get a better cell phone
Technology is getting better by the day, it seems, and staying stuck with an old phone and a mediocre plan is far from ideal. If you use your phone a lot, and most people do, a tax refund can be a great opportunity for you to upgrade to a brand new cell phone and get a cell phone plan that fits your needs. If this means that you can get rid of a land-line phone, or keeps you from needing a laptop, it can save you money in the long run.
7. Do some house maintenanc
There are always a lot of things that need fixing around the house, things that we usually put off because we don’t have the time and money to deal with them. A tax refund is the perfect incentive to get some of the work done. You can repaint the house, fix the plumbing, buy some new furniture, get a couple of new lamps for the living room, get a new carpet, remodel your bathroom, improve security with a sturdy front door and new windows, invest in some landscaping, buy more energy-efficient appliances, etc. Your house is probably your largest investment, and taking care of it pays off.
8. Invest in acquiring new skills
Having a range of useful skills doesn’t just look good on your resume – it can help improve the quality of your life or even help you earn a bit of money on the side. If you’ve always wanted to play an instrument or sing you can join a class or go to a vocal coach. Maybe you want to invest in a defensive driving course that will greatly improve your driving skills and lower your car insurance costs. You could take a cooking course or buy a decent camera and start learning about photography. These skills can increase your enjoyment of life, and might also increase your income.
9. Invest in your health
Let’s face it, most of us need to take a good hard look at ourselves and make a few changes when it comes to our health. With some extra money on your hands you can afford to,join a gym, consult with a nutritionist, and hire a personal trainer. Maybe you’d like to combine acquiring new skills and healthy exercise by joining a dance or martial arts class. Investing in your health also means fixing your teeth, getting a checkup at the doctor’s office and stocking up on some supplements like D3 and fish oil.
10. Allow yourself some luxury
Sometimes you just have to give in to urges and pamper yourself a little, especially when you have a good opportunity to do so. You can use your tax refund to go on a little romantic trip with your partner, wine and dine at some higher-class restaurants for a while, take the kids to Disneyland or anything else that allows you to live life to the fullest and recharge your batteries. This way you are investing in your mental health and strengthening the bond between you and your loved ones. The important thing is to use only a portion of your tax refund on indulgence and dedicate the rest to things that will improve your life long-term. Finding this balance is the key to enjoying your windfall.
People are often tempted to go wild and start spending their tax refund willy-nilly, losing hundreds of dollars on insignificant items bought on impulse. Try to fight this temptation and look into some of the smart options listed above that will help you put that extra money to good use.