Should you save or spend your tax return? While it’s tempting to take that money and spend it, it’s very important to stick to your goals.
Ask yourself the following questions: Do I have any credit card debt? Do I have any student loans I can pay down? Think about the things that have a negative impact on your savings now and work on paying down debt. Every year, we take a portion of the return and put it towards our tax bill to lighten up the burden.
5 Ways to Save and Spend Your Tax Return
1. Add to Your Emergency Fund
Do you have a stash of money in case of an emergency? YOU NEED ONE! Find out the reasons why you should have an emergency fund. My wife and I take this very seriously and I think this is something you should consider with your tax return.
2. Pay Off Credit Card Debt
Paying down credit debt should be at the top of your list especially if you have credit card debt that is carrying high interest. Some experts recommend you should only carry 20-30% of your credit limit. I completely disagree with this! We use our credit cards as a replacement for cash and don’t spend what we don’t have in our bank accounts. Keep your credit card debt at 0% if possible.
3. Make Home Improvements
My wife and I have always put our money in to our most precious asset – our house. Should you take a vacation or renovate your outdated bathroom? Adding value to your home not only improves the look of your home, but also makes you money when you sell your home down the road. This year, we are using some of our tax return to add additional closet space in our basement!
Doing any shopping online for supplies? Check out our article about Saving Money When Shopping Online!
4. Invest Your money in a Tax-Sheltered or Taxable account
Investing your tax return in a tax-sheltered account can give you a head start on next year. Already maxed out your tax-sheltered account? Open a taxable account and depending on your risk tolerance and goals, which is another great way to build long-term wealth with your tax return.
5: Donate to Charity
Do you have everything you need and have enough money saved for retirement? First off, congratulations! We hope you continue to be successful!
How about donating to a charity? Giving back and helping others in need not only helps individuals in need, it helps you know your money is going to a good cause. It also allows you to claim the tax deduction, which can help out with your next year’s return.
What are you doing with your tax return this year? We would love to hear about it!