Are You One of the Lucky Ones With a Refund Coming Your Way?
I'm In Debt
- Posted:
2/7/2009
Income tax time can be either a stressful time or a joyous one - depending on whether you have to pay or whether you'll be receiving a refund from the IRS. If you are one of the lucky ones, what will you do with your refund? In the past, people have generally used tax refunds to pay for vacations, buy luxuries they wouldn't have purchased otherwise, or simply deposited into their bank accounts and used slowly on things you can't remember you bought or paid for a week later.
There are better ways to use your refund, especially with a poor economy. I put a lot of thought into this recently, because people all around me are being laid off or losing their jobs as companies go under or make changes to their system in an effort to reduce expenses to stay afloat. How can a tax refund be put to the best use?
Emergency Savings: I'm thinking one of the best things you could do with a tax refund is set up an emergency fund. If you don't already have one, you'll be among the hardest hit in the event you do lose your job or source of income because you won't have any money to help you get by as you look to replace that income. As credit lending gets tighter, having savings means you can repair a broke down car or furnace even if you can't use a credit card or take out a loan. Use a risk-free,
interest earning savings deposit account to get the most bang for your buck.
Catch Up: If you are already behind on your bills and are receiving a tax refund, it's a good opportunity to get caught up by making as many payments as you can. Just have a plan in place to prevent falling behind again (like a budget).
Pay Something Off: If you are keeping up with your bills and living expenses (although just barely) take a look at how much you're getting in the form of a refund and the total amount owed on each of your accounts. Are there any high interest credit cards or loans you could pay off now, and save on how much money you're paying out each month? If you can pay off accounts that are costing you $200 a month in payments, that's an extra $200 a month you have going forward to apply to other debts to pay off quicker; or put into a savings account.
Whatever you decide to do, make a conscious decision of how to use any tax refund. It's "bonus" money, and if you simply deposit it into your everyday bank account it will be used up quickly and you probably won't even know where it went. Make smarter decisions and know what you're using the money for, and make a positive difference in your financial situation.
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