Tax season is drawing to a close. For many people, that means a refund. These 10 suggestions will help ensure you put the money to good use.
Tax season is almost coming to a close, and that means some of you will be getting a refund if you haven't done so already. I wanted to write a brief post about tax refunds because if allocated appropriately your refund can help you take a meaningful step towards your 2016 financial goals.
Pay of high-interest credit cards:
There is no point to holding onto your refund if you are going to lose it all to interest fees due to credit card debt. In a prior post, we discussed the important elements that go into your credit score with the bulk of impact of 35% being attributed to payment history, followed by 30% for amounts owed, and the less impactful but still important elements of length of credit history (15%), credit mix (10%) and whether or not its new credit (10%).
Pad your emergency fund:
As much as we attempt to plan for all scenarios, we cannot foresee everything, and therein lies the benefit of padding your emergency fund. When the clouds roll in and the rain starts to pour, it can serve you well in times of need and keep you on track with all your other savings/investing goals. There is fairly consistent consensus on building up the reserves to be able to cover at least 3 to 6 months of living expenses.
Pay down the principal on a home or auto loan:
Shortening the life of a loan has the additional benefits of saving on interest over the long haul and definitely worth consideration for your refund.
Buy a bike:
Purchasing a bike with your new cash infusion can help you get healthier and save more money down the line. I recently came across freecycle.org
It's a grassroots and entirely nonprofit movement of people who are giving (and getting) stuff for free in their own towns. It's all about reuse and keeping good stuff out of landfills.
Buy a new pair of running shoes:
Allocating your funds to a good supportive pair of shoes for walking or exercise is money well spent as it will minimize injury and pain as you exercise or go about your day.
The key to accumulating wealth is to spend less than is coming in and save and invest the difference. If you are able to contribute to your post-tax retirement accounts, do so.
Sign up for a 3,5, or 10k:
I am a huge proponent of being active, and walking is a great way to do this. Signing up for a walk/jog/or run event can be great on multiple fronts.
One, you get to exercise
Two, the health benefits will translate into less sick days and thus more savings
Three, you can do it for a good cause and have it benefit an organization you support
Teach your kids about money:
Financial literacy begins at an early age, you can use part of your refund to think of a creative way to teach your children about money or do what this dad did and send them a letter on behalf of the "Bank of Dad"
Image via Reddit
Take a course or get certified:
Your refund may be a great opportunity to take a course you have been meaning to do but haven't, or a great opportunity to get a certification that will be applicable to progressing your job and career.
Pay yourself first, and with the remainder do something you enjoy, because "life is short, even at its longest" so make sure to take some time to enjoy the journey towards being financially free.
How are you planning on spending your tax refund this year?