It can be easy to blow your tax return on leisure items or on one big-ticket item, but these are the top three ways we feel are the best ways to spend your refund check this year that will make your money go farther (you’re welcome):
- Start a retirement fund. Many people miss the mark on starting a retirement fund earlier in their career rather than later, and most are still not even saving enough. It can be easy to rely on work to get your retirement account started, but, unfortunately, not all companies offer a 401K, especially in entry-level positions. Even if you do have a retirement savings plan through your employer, it would still be wise to contribute extra revenue toward this account. Some companies even go as far as to match what you contribute. Just be sure to ask your boss about this. However, if you are going at this option alone and are looking for a plan with a tax-free principal, the Roth IRA would be a very attractive choice. As always, just do your research on the best plan for you.
- Open a college fund for your kids. With the increasing costs of higher education and overwhelming student debt, it is becoming much more difficult for recent college graduates to get ahead in the economy. By opening a 529 savings plan for your children or grandchildren, you are not only helping them invest in their future, but you are also providing a tax break. As long as the money used in this account is for educational purposes, it is tax-free.
- Take 10% for yourself. You work hard throughout the year, and you should reward yourself for it. By following an all-work-no-play lifestyle, you’ll easily wear yourself out and begin to feel resentment. Not just that, but it could also promote impulsive spending in the future, which creates poor spending habits. Allow yourself to enjoy some of these funds each year by investing or spending 90% of the refund for a responsible choice, whether it be putting it toward credit card or loan debt, directly into savings, or even toward fixing something in your home that’s been bothering you all year. Once you do this, take the final 10% and enjoy yourself. A weekend getaway, some new clothes, a spa day or even a few high-end dinners is just a little way you can show yourself some love with the hard-earned cash.
One more thing to keep in mind as you decide what to do with this year’s check: Be leery of large tax refund checks as it usually means you are receiving less money than what you could throughout the year. Talk to your human resources department at work to go over your W-4 form to ensure there is not excessive withholding on your paychecks. Having a large check provided consistently each year may mean you have too few personal allowances. Talk with a certified tax professional or your accountant to also inquire about this on your forms.
How are you spending your tax refund this year?
Photo: Flickr: GotCredit