The day you receive your tax return in the mail is nothing short of magical.
You finally get a little back from all the money you’ve put in throughout the year. This magical feeling can come with the urge to blow your newly acquired funds, but consider saving or spending it responsibly.
Questions to ask yourself:
Do I really need this? This can be true for clothes, accessories, gifts, expensive trips and dining out. If you’ve been living comfortably without it, chances are you don’t really need it.
How will this benefit me in the long run? If your purchase will continuously benefit you, it might be worth the investment. Look at the big picture and how it will impact your future.
Will this require me to spend more money in the future? Some purchases are not a one time deal. Since tax refunds do not happen throughout the year, don’t make purchases you can’t afford year-round.
Wise ways to spend your money:
Put it toward a car – Whether it is catching up on payments, finally getting those new tires or a down payment on a new car, the investment will be worth it. If you’re purchasing a new car, look for something with low miles and high gas mileage. Purchasing a car with good gas mileage may cost a bit more, but you’ll constantly save money. Want more tips for saving money on a car? Check out our article here.
Put it toward your home – If your home or apartment is in crucial need of an update of repair, your tax refund can be a good start. For the sake of putting your money to its best use, try to stay more along the lines of much-needed updates, not those that fall under the decorating category.
The money can also be set aside for a few months’ rent. You’ll thank yourself during financially tough months. To find out when to save and when to splurge on your apartment, consult our guide.Open a savings account – Savings accounts should not be unheard of for 20-somethings. You never know when you are going to need emergency funds. With my savings account, I put money in when I can and then pretend it’s not there. That way I don’t constantly have the urge to spend it, but I know it is there if I ever need it. Shop around for the highest interest rates, so you can earn a little free money.
Pay off debt – Most of us have some form of debt. With your tax refund, use it to make a little more than the minimum payment each month. This will end up decreasing the amount of interest you pay in the long run. You can also save a few months’ worth of payments for the future when you’re tight on funds.
Invest – This might require some serious research, but who says you shouldn’t play the stock market a little? If you play your cards right, you may end up making a significant amount of money. But again, be sure you know what you’re doing and consult with a professional if needed. It might just make that Stock app on your iPhone a little less useless.
Donate – The person who needs your extra money may not be you. If you have an organization or cause you care about, consider making a donation. Keep in mind that there are others out there who are less fortunate. Donating will make you feel good and make the world a little better. Donations may also be tax deductible, which is another benefit.
Put it toward future travels – At our age, we all have a case of wanderlust, but are conflicted because we can’t ever seem to afford a cure. Your tax refund can be the start of significant savings for a future trip. Even if it isn’t the whole refund, keep a travel jar in your room and put extra money in when you can.
The undeniable theme here is saving. It can be difficult when your bank account isn’t exactly overflowing, but it is necessary. If you don’t have a crucial purchase to make, saving is the way to go. With the right mindset, your tax refund will go a long way and benefit your future.
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