5 Productive Ways to Spend your Tax Return

If you are expecting to or have already received a tax return this year, you are probably pretty excited! It’s like a bonus right? Well, actually, this money was yours to begin with. Think of it as the IRS’s nice way of saving it for you.

Now you may have ideas of a wild weekend or a fancy new toy you could purchase with this money, but before you do that, let’s consider 5 other choices that may be a little more helpful to your financial situation. Evaluate your needs, and treat this check like you would any other paycheck before spending it all.

1. Pay off a high interest debt or credit card. If you have a lot of debt, one of the most productive things you can do with your tax refund is to pay off loans that cost you the most to carry each month. Pay down any Payday loans, credit cards, private student loans, car loans, or anything that, once paid, will increase your monthly cash flow and eliminate high interest payments each month.

2. Consider home improvements or refinancing. With good credit and a healthy understanding of the mortgage re-finance market, you may be able to take advantage of the record-low interest rates, saving you thousands of dollars on interest each year. If you are content with your mortgage rate, go through your home and decide if your tax return could be allotted to pay for kitchen repairs, a new roof, upgraded energy-efficient appliances, curb appeal, a new paint job, or maybe even a new pool.

3. Increase (or start) an emergency fund. Emergency funds are there for peace of mind. One would hope this money would never need to be used, but sometimes, without a backup plan, even a small financial surprise can send you into panic mode. It is prudent to maintain about 6-8 months worth of savings in an account to cover all types of emergencies, and you will be well-prepared when something unexpected comes up. As a good habit to follow up on, once your savings account has been established, continue to set aside a set amount or percentage each month.

4. Spend it on things you or your family needs. It is spring time, so it may be time for a round of new tennis shoes or sandals for the family. Take inventory, check with each member of your family, and find out what is pressing, including new clothing, school or activity supplies, medical or dental needs, or vehicle repairs.

5. Invest in family time. Perhaps you have everything you need, or maybe you allot a percentage to each of the ideas above and you have money remaining. One of the best investments you can make is time with your family. Plan a spring or summer trip together, even if it is a short weekend trip. Cut extra expenses by driving or camping. Go explore, see new tings, laugh, get dirty, enjoy each other. You will create memories that way outlast tax season!

We would love to hear how you chose to spend your tax return this year or even in the past. Have you don’t anything exciting or unique, or something that we mentioned here?