If you are anything like me, then you loathe this time of year and you’re not looking forward to doing your taxes. As of this post, I still haven’t completed mine, and will probably drag my feet just a little longer. I am not in a huge rush to write Uncle Sam a check just yet.
However, for those that have some money coming their way, here are few things to think about as you consider your options on what to do with your refund.
Don’t Blow Through It—Regardless of the amount of your refund check, you don’t want to waste it. Don’t go to the mall, club, or blow it at your local casino at your favorite slot machine! It’s very easy to spend the money when you receive it. I would recommend putting at least half of it in your savings account, contributing to your emergency fund. It always recommendable to have at least 3 to 6 months worth of monthly living expenses set aside in case of an emergency or job lose. A tax refund could help you in that area. Pay yourself first!
Pay Some Bills—After paying yourself first, if you have some credit cards, it’s a good idea to allocate a portion to your cards with the highest interest rate. Credit card debt is one of the worst types of debt out there, so I always recommend paying down those as quickly as possible. Using tax refund is a good place to start.
Invest a Portion—Depending on the size of your refund and whether you have already addressed your emergency fund needs, next would be to invest some of the refund. I would advise making contributions into a Roth IRA or a brokerage account. Give those funds a chance to grow.
If you typically receive large tax refunds, it would be a good idea to reassess your W-4 tax withholdings and speak with a tax professional in detail. Be sure to make adjustments so that you will bring home more per month than to wait until tax time to get your own money back. Pay yourself first.
If you have any questions or concerns, please reach out to me. In the meantime, I guess I should prepare to file mine!