If you are getting a tax refund back this year, then you may feel like you won the lottery when you get it. All of a sudden you will have a few thousand dollars to spend and you can do whatever you want with it. It can be tempting to blow it quickly, however, there might be a better option. To help you make the best of the money that you get back, here is a list of things you can do with your tax refund.
5 things to do when you get taxes back
1. Create an emergency fund
Have you ever been driving down the road and the tire blew out on your car? Or perhaps you came home one day to find out that your hot water tank busted and it flooded an area of your house. Having an emergency fund helps in situations like these because you are able to pay cash for the unknown and you do not have to stress about how you are going to pay for it. We have our fund in a high interest bank account, so if you are interested in establishing an emergency fund consider opening a bank account that is specifically for life’s emergencies. If you do not currently have a high yield account, check out Everbank as they are paying a decent interest rate for a savings account.
2. Pay off your debt
When you are in debt, it can feel overwhelming. Don’t let your debt hang around for years. Develop a plan to pay it off fast and use part of your tax refund to get you started. If this interests you, consider signing up for my new class called Debt Free in 18 Months. This class is designed to help you get out of debt in a short period of time so that you can have peace of mind and achieve your financial goals in life.
3. Fund your retirement
In a recent article from TD Ameritrade, the average Baby Boomer has a shortfall of $475,000 when it comes to saving for retirement. If you find yourself in this boat, then consider using the tax you get back to fund your retirement. They say that the last years of your life can be be the most expensive years of your life as well.
4. Do something fun
If you feel that you have a good handle on the rest of these suggestions, then consider having some fun with the money you get back from your tax refund. Take the family on a vacation, go to a theme park, do something that you have been wanting to do but you didn’t have the money to do it. Don’t get me wrong, you need to be responsible with your money but you also need to enjoy life as well.
5. Contribute to a 529 college savings plan
According to an article from CNN Money, the average tuition cost for a public university is $15,000 per year. This comes out to about $60,000 for a four-year degree! College is becoming more and more expensive each year and you need to be prepared for it. A 529 Plan is operated by a state or educational institution and it is designed to help families set aside funds for future college costs. The great thing about this plan is that there are tax benefits to creating one. As long as the money from the plan is used for the beneficiary’s college expenses, the distributions are tax-free.
What do you plan to do with your tax refund?