How To Make the Most of Your Tax Refund
Our blog is all about helping our readers make the most of their finances, and for most of us, our tax returns offer one of the single biggest yearly opportunities to make great strides towards better financial health. Of course, the temptations to blow our tax refunds are great, with marketers from far and wide trying to strip us of our hard-earned returns. But with a little patience, and a willingness to put off temporary delight for long-term gain, we can make our tax refunds work for us.
Planning for Your Tax Refund
Soon, Uncle Sam will be doling out tax returns for those who have overpaid taxes over the last year. If you get a W-2 and don’t have any additional income (from a 1099 form, for example) that could cause you to end up owing more in taxes than you’ve already paid, you should be listening because here’s where things get dicey: a lot of people blow their tax refunds before they’ve even arrived. Families plan expensive vacations, couples head to the casinos…whatever the story, the data is clear that we aren’t typically great stewards of our returns.
Instead, avoid the eventual anxiety that comes with blowing your tax return, and develop a game plan that will put you ahead on your outstanding debt.
Tax Refund Game Plan
While you’re waiting for your refund to be deposited, plan out a list of your top expenses, and which outstanding debts that have high interest, or are just very large. These should be your top priorities when it comes to your tax refund check.
With your list of creditors in hand, decide on how you’ll allocate your refund. Are you “this close” to paying off a car loan? Or just a few hundred bucks shy of getting rid of your credit card debt? What debts keep you up at night? Chances are, those are the best places to consider allocating your tax refund.
With a little patience and self control, you’ll be sitting much prettier than your cousin who just blew his refund check at Vegas. (Sorry, Jimmy, but the House always wins!)