Wednesday, December 25, 2013, AM | 1 Comment
Some people wait until the last minute to file taxes. That is usually because they owe the government money. However, if you are expecting a tax refund, you might be looking forward to getting your taxes filed as soon as possible. Lots of folks already know how they are going to use the extra money.
But before you rush out to shop for a new TV or fly off to Mexico, you might consider some uses for this money that can help ensure your financial security and comfort in the future.
Pay Down Credit Card Balances
Tax refunds usually arrive fairly early in the year. Lots of folks are still paying off credit card debt that they ran up over the holidays in April. You might consider getting rid of expensive debt before you rush out to purchase something else.
While it can be tempting to get new stuff with your “extra” money, be sure you pay off any new stuff from months past. You’ll feel much better about erasing your debt than you would about making a new purchase.
Start an Emergency Savings Account
It is always a good idea to have some cash set aside for a trip to the dentist or auto mechanic. This can help keep you from running up new credit card debt in the future, and it can also give you peace of mind. When you get a nice tax refund check, it’s hard not to think about all of the nice things you could buy or to consider those things that have been on your wish list.
But if you put the money in an emergency fund right away, you don’t have to think about it after that. If you have the money readily available to spend on your wish list items, you will be extremely tempted.
The day you run into an emergency is not the day to be moving money around—you want those funds available right away.
Fund an Individual Retirement Account
If you lack a retirement plan, you should know that it is never to early or late to begin saving for the future. Besides enabling you to save for retirement, these accounts have tax advantages that can help you save even more money.
Planning for your long-term security and comfort should also help you feel more financially secure for the future. If you have been neglecting your retirement plan, don’t put it off any longer!
Instead of rushing out to purchase an item that replaces something you have that is already functional, why not consider repairing or maintaining something you already have? This could be the perfect time to find out why your car is making an odd noise or your home thermostat keeps resetting itself. This simple and proactive step can save you a lot more money in the future, and it might even help you stay safer.
These four options are the smartest choices for that tax return that might be burning a hole in your pocket. While most of your return should go into something responsible and practical, you do not have to be entirely frugal when you get your tax refund.
After all, it is your money that you earned during the past year. Just so you don’t feel deprived, you could set aside a portion of it for a treat. But you might feel virtuous if you use the bulk of it for something sensible.
This article was written by Dixie Somers, a freelance writer who enjoys writing for business, finance, women’s interests, and technology. Dixie lives in Arizona with her husband and three beautiful daughters who are the inspiration for her writing.
Many tax attorneys who assist clients with IRS tax help suggest that you put your tax return into an emergency fund right away so that you aren’t tempted to spend it. You may think that you need it right away, but you’ll be glad you have it when a real emergency arises.