I got a tax refund! 10 smart ways to spend it

I was amazed when I saw Turbo Tax’s estimate for a refund this year, which was not expected. (I think the energy efficient windows installed last spring made the difference.) While some folks seem to enjoy letting the government keep more of  their money and then see the refund as an expectation, I like making the most of my own paychecks. I don’t consider the government to be a depository. Whichever group you fall into, there are at least 10 smart ways to spend your tax refund. Take advantage of this financial opportunity!  I’m thinking half into a retirement fund and half to pad my vacation fund.

For those who have debt and little no savings:

  1. Pay off short-term debt. You can either start with high interest credit cards or card with the lowest balance. If credit cards have caused you problems, it may also be a good idea to cut up the card and close newer accounts. Then, don’t get more credit cards.
  2. Start or build an emergency fund. This helps you be prepared in case you lose a job or are out of work for a time. 

For those who have a mortgage and/or car loan OR want to make a purchase someday:

  1. Pay down principle on your home mortgage or vehicle. If you do not own your home, use your refund to start saving for a down-payment. If you need better transportation, sell what you have and put that money together with your part of your refund to make a purchase without going into debt.
  2. Save money for significant expenses. Having money to meet an insurance deductible, replace tires on the car, and not borrow to pay for annual and seasonal expenses is a great way to be prepared for things that you know are going to happen.
  3. Make home improvements that will save you money. For instance, you can lower your heating and cooling bills by installing double-pane replacement windows and adding insulation to your attic.
  4. For those whose poor credit has prohibited purchase or decent interest rates, check your credit report at http://www.annualcreditreport.com. Then, make a plan to pay back some portion on your old debt. Even 5-10% pay be enough to settle. Be sure to get things in writing before you send money and don’t give access to your accounts.

For those who have peace of mind in the above areas:

  1. Add to your retirement savings.
  2. Get disability insurance. This is important if you are self-employed. You may be able to get one through your employer.
  3. If you don’t already have it, get a will and term life insurance. This is important if you have dependent children.
  4. Invest in yourself. Consider taking a class to improve your job skills and boost your income. Join a health club and start working out. Buy a computer and use it to track your budget and savings goals. Stressed out? Take a well-deserved vacation.

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