Living a Better Life
(featured column... from the editor's desk)
How
to Spend Your Tax Refund Wisely
by Michelle
Jones
It
can really be a challenge to spend our money wisely, especially tax refunds,
which may seem like free money! According
to the IRS, about 70% of U.S. taxpayers are due a refund this year and the
average amount will be over $2,000.00. But
once the forms have been filed and the refund checks are in the mail, it’s up
to us to spend the money wisely, whether it’s $200.00 or $2,000.00. More...
"Next to
being shot at and missed, nothing is really quite as satisfying as an income tax
refund.'' - F. J. Raymond
Often,
there are so many things we find ourselves wanting to do with any extra money we
receive that we forget some of the more important matters that need to be taken
care of, especially once the check arrives and we take it straight to the bank.
And
for those of us who are expecting to receive a tax refund this year we can spend
that money more wisely by…
Making a Plan!
Taking
the time to review your circumstances and your finances before the check arrives
is a good idea. Think about your
options.
Approximately
50% of taxpayers report they are planning to pay down debts with their tax
refunds, and that’s an excellent thing to do with any extra funds you receive
throughout the year. Paying down
debt will not only save you money in interest charges, but it will also lower
your total monthly payments and provide a better cushion for meeting your
monthly living expenses, therefore helping you to stop accruing more debt.
However,
there are also other wise saving and spending choices to consider.
To
make wise decisions about how to save or spend your refund, you need to really
think about all of your options. If
necessary, make a list with two categories, “needs” and “wants.”
Then prioritize your options on each side and try to take care of as many
“need” items as you can, before spending all your money on your “want”
items.
Here’s a Few Suggestions…
Wise
Saving Options
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Review your
bills that are due annually and put some money away to cover them, such as
insurance premiums, home warranties, club memberships, etc… these are what I
call “forgotten bills.”
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If
you find that these bills will not be due for several months it would be a good
idea to transfer the money over to your savings account so you’re not tempted
to spend it on something else.
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If the bills
will be due soon go ahead and write the checks out and deduct the amount from
your checkbook balance, then mail the check a little closer to the due date.
(And if you have an interest bearing checking account you might even earn
a few pennies in interest!)
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Add money to
your emergency fund.
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Most
financial experts recommend that we have at least 6 months of our monthly income
set aside for emergencies, but really any amount is better than none.
Just keep this money liquid, where you can get to it in an emergency.
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Pay extra on
your mortgage, or, if you’re a renter, consider putting your refund towards a
savings account for a home of your own—while the interest rates are still so
low!
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Consider
increasing your investments (IRAs, money-market accounts, 401ks – especially
if they’re matched by your employer). Do
some research to find out what your options are!
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Taking care of
home and auto maintenance, and especially repairs.
Check your tires, if they need replacing that’s a big priority!
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If you’ve
been putting off health and dental checkups (which could prevent bigger and more
costly problems later in the year), now would be a good time to get them
scheduled.
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And
if you don’t have health insurance, maybe your refund could be put towards
getting coverage. (We have links
for dental plans and free insurance quotes on the site.)
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Is there
something that your family could use all during the year that might save you
money in the long run?
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Like
maybe an annual membership to AAA
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New insulated
windows for your home to save on utility costs
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Or even a deep
freezer that could save you money on dining out each month
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Even if money
is tight taking a well-needed vacation is not out of the question. We all need a break now and then, and spending quality time
with your family is always good. However,
you don’t have to spend a fortune to have fun!
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Consider taking a long weekend trip instead of an entire week, or visit
out-of-state family or friends who’d probably love to see you (and feed you
too). You could set a little money
aside to take them out to a really nice dinner one night as a thank you!
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Invest in your
future. If you’ve always wanted
to start a business or go back to school to further your education or training,
you could see your refund double many times over by taking those steps now.
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Increase your
charitable donations or help others who are in need.
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