As we noted yesterday, it’s tax season! You may have a long list of things you can do with your tax refund. If you’ve been struggling to get by, now is the time to catch up on overdue bills or pay down debt. You also might want to sock it away for a rainy day. If you’re pretty set on the emergency stuff and caught up on your bills, you may feel like you can use the money to get a little bit ahead. If that’s where you are, here are some suggestions for how to use the money wisely.
- Plan for a splurge. You’ve been working hard all year. You deserve to have a little fun and blow off some steam, right? Of course, as long as you don’t go into debt to do it. Put a little money away for a vacation. If you’ve been wanting a new computer or TV, or some other big purchase, keep the money until you’re certain of what you want. Being able to pay cash for life’s treats helps you stay on track with your budget while still enjoying yourself.
- Save for retirement. At some point, you’re going to stop working. While it’s not exactly the most glamorous use for a tax refund, contributing to a retirement savings account like an IRA can help your money grow and be there for you when you need it.
- Buy insurance. This might be the least fun, least glamorous tip of all! But if you’re relying on your employer to provide you with life or disability insurance, you probably don’t have enough. A liability insurance policy is also a good idea to protect you above and beyond the limits on your homeowners or auto insurance policies. If you get sued for damage you cause, those policies might not be enough. Speak to an insurance professional to identify gaps in your coverages.
- Make repairs at home. Consider using the money for home improvements. Small upgrades can transform an entire room. Also, fixing a small problem can prevent a large problem later, saving you lots of money down the road.
- Use it as a down payment for a new car. We said this last time but it still holds true. Putting aside money for a new car is always smart. Even with the best maintenance, cars break down and eventually become irreparable. Do yourself a favor and be ready for the inevitable.
It’s not every day we find ourselves with a wad of cash burning a hole in our pockets. Used carefully, your tax refund can set you up for success in the coming months.
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