It’s tax season again, and many of us have visions of tropical vacations running through our heads. While luxury is a valid way to spend your tax refund, there are more financially responsible actions you can take, especially if you are facing debt. As a Clearwater debt collection attorney, we know how hard it is to get out of debt collection once the process has begun. Here are some smart ways to spend your tax refund this year.
Pre-Pay Some Priority Bills
Maybe you’re not in debt, but you’re basically just covering expenses each month with little to spare. Wouldn’t it be nice to take a little break from barely meeting your payment deadlines? Apply your tax return to your most crucial bill (mortgage, rent, etc.) and enjoy a brief period of financial freedom. You can use the time to keep paying ahead so you have a security net if you get behind, or you can take the extra money and get started on your savings account. Just be sure that the company allows you to pre-pay. Some companies, like loan companies or many mortgage companies, will apply the extra payment to the total, but that doesn’t decrease your immediate commitment.
Avoid Future Problems
There is a saying, “It’s expensive to be poor”, and it refers to the fact that when you are just getting by, you can’t afford preventative measures. When you get a little extra boost in your finances from your tax return, use it to prevent future expenses. Get your car checked out and see if there are any issues that need to be addressed, especially if they may escalate over time. Have someone come and check your home for leaks or small issues that could end up getting worse. This is a great time to be proactive and save money in the long run.
Pay Off Debts
If you’re in debt, pay it off as soon as you can. Try not to use your tax return for other items if you owe money. Instead, use it to pay off your smaller debts and clear them once and for all from your record.
Start Planning for Retirement
This is a great time to start a retirement fund! An IRA or other retirement fund will yield high returns, and a contribution like your tax refund can really get the ball rolling.
There are so many ways you can plan ahead with your tax refund! What do you plan to do with your return?
Thanks to our friends and contributors from the Law Office of Michael A. Ziegler, P.L. for their insight into smart ways to spend your tax refund.