A few weeks ago, I admitted that I overpaid my taxes for 2013 and would be getting almost $6,500 back. Ugh. Well, it landed in my bank account a few weeks ago and we did some really boring things with it. Brace yourselves. This is what we did:
- We invested $3,000 in index funds.
- The rest is still sitting there.
Obviously, we need to do something with the rest of our refund. However, we often fail to be proactive with any extra money we come across. In fact, we’ve been known to let our emergency fund balloon to ridiculous levels, mainly due to laziness on our part. But this year will be different. We promised not to let our emergency fund get higher than $15,000 for more than a few months at a time, and we’re sticking to that promise. But enough about me…..
5 Constructive Ways to Use Your Tax Refund
If you’re getting a tax refund, you’re probably trying to figure out the best ways to put it to use. It is your own money, after all. You should enjoy it or at least benefit from it in some way, right? Also, if you haven’t filed your taxes yet, please know that time is running out. At least take some time to e-file for an extension so that you don’t get stuck paying unnecessary fines.
Once your tax refund lands safely in your bank account, you need to put it to use. Here are five constructive ways to use your tax refund:
Pay Down Debt
Paying off any debt you may have is by far the best way to spend your tax return. So pay off your car, your credit card, or your furniture. Hell, pay off your student loans for all I care. Your future self will thank you.
Add to Your Emergency Fund
If you don’t have an emergency fund, or if you only have a small one, your tax refund is the perfect place to start. Just plop that baby in the bank and forget it’s there. Please.
Start a Targeted Savings Account
If you’re out of debt and have a substantial emergency fund already, you could always start a targeted savings account for anything you want. You can choose to save for whatever your heart desires, whether it’s a long vacation, a new or used car, or your kid’s college. The choice is yours to make.
Take Care of Business
Being an adult often means paying for things that are incredibly boring, like home maintenance, car parts, or medical bills. Like it or not, your tax return might be the key to taking care of some of the big expenses you’ve been putting off. I personally need new tires on my minivan, and my tax refund might foot the bill. Yawn.
Save for Retirement
The fact that you overpaid on your taxes means that you get some of your own money back, but what should you do with it? If you can’t come up with a better idea, you might as well save it for your own retirement, right? So, add it to one of your taxable investment accounts or use it to top off your ROTH IRA. No matter what you decide, saving for the future is always a good idea.
If you haven’t filed your taxes, please know that you only have four days left unless you act quickly. At this point, I would suggest filing for an extension online instead of snail mail!
Have you filed your taxes yet? Did you get money back this year? What do you plan to do with it?