Ballin’ in February. Broke in March.
Here are 6 things you SHOULD be doing with that Income Tax
It seems like just last month we were saying “Ho-Ho-Ho” and throwing away disgusting fruit pies… and now it’s time to do Adult Stuff like wait for your W2’s to be mailed, file those taxes, and possibly get an income tax return.
If you are one of the millions of Americans who not only receive an income tax return, but also depend on receiving one every single year…chances are, we could make a few adjustments to how you handle your cash. Instead of living large for 45 days and struggling for the other 300 days of the year…let’s stop the pattern NOW and make a plan for your income tax return.
Here are six things that you should consider doing with your Income Tax Refund this year.
Build an Emergency Fund.
Think about the most recent emergency you found yourself in. Whether it was an extremely high utility bill or a car that wouldn’t start, you probably panicked. Rather than delaying a bill payment, getting a loan, or cutting a corner…why not put a few dollars aside? You’ve got it coming…so protect yourself and your family right now. I advise saving $1,000—but even $500, $250, or $100 is better than $0 in an emergency. You can find my full write-up on the importance of an emergency fund, and how mine saved my bathroom from being flooded with human waste…RIGHT HERE.
Pay off your debt.
The only thing that I hate more than not having money, is making monthly payments. Lucky for you, an income tax return is a great way to pay down the principle balance or pay off any debt you have looming over your head. Not only will you save money on interest, but you will also free up the cash you’re currently spending on monthly payments. As an added benefit, paying off debt and collections could easily boost your credit score!
Contribute to an IRA.
Put aside a few dollars into an IRA now so you don’t have to wait until the last minute next tax season. Not only will you lower your taxable income (yay to paying less taxes), but you can save a lot of money for retirement with an IRA! As a quick reference, Traditional IRA’s gives you a tax break right now. Roth IRA’s gives you a tax break when you retire.
Think of your children.
Open up a 529 Educational Savings plan! Not only are you investing in the future of your children by making sure they can go to college without having to drown in student loan debt, but many states offer 529 Educational Savings Plans with tax benefits. Check it out!
Put it into a high-yield savings account or CD.
You work hard for your money. Make your money work for you for a change! Depositing to a high-yield savings account or CD (Certificate of Deposit) will earn you better interest than if you just deposited it to your regular savings or checking account. Plus, the longer it sits there, the more easy money you’ll earn. Shop around for the highest rates and make it happen.
Take 10% and have fun!
Using your tax return to further your goals is always the smartest trick in the book, but now that you’ve done something responsible with your money, don’t forget to reward yourself! Take (no more than) 10% of your income tax return and have fun! Have dinner, buy a new outfit, or whatever small thing makes you smile.
What is Man Vs Cash doing with mine?
Thanks for asking! 😉
My New Years Resolution is to pay off four things this year: Student Loans, Furniture Loan, Credit Card, and my husband’s car. By paying them off, I will save $480 in monthly payments alone, tons of interest, and be four steps closer to having my house paid off in six years. So, this year I am staying focused on my ultimate goal. We usually don’t get any returns, but every single penny of our income tax return is going towards paying off debt. Simple as that.