It’s that time of year again…tax time. The time of year many people dread because it means that they will have to pay the government even more money. However, sometimes we get “lucky” and end up getting money back. If you are getting money back this year, what do you plan to do with it? There is a saying that says something like, “if you don’t control your money, it will control you.”
This is true, especially when we get an unexpected amount of money back. If we don’t have a “plan” for what to do with it, then we will most likely spend it on something in the spur-of-the-moment and it will be gone. So, what do you want to do with your tax return? Below are a few suggestions.
1. Establish an Emergency Fund. A lot of people live paycheck to paycheck, which is scary because you never know when an emergency may occur…or an unexpected job loss may happen. An emergency fund will help make the “emergency” a little less urgent and help you fill in the gaps when needed. Therefore, it’s a good idea to set some of your tax return aside and start an emergency fund.
2. Replace old Clothes. If you have children, then you know how fast they go through clothing. Kids aren’t cheap and when they are growing, it seems like we are constantly buying clothing. Setting aside part of your tax return to buy new summer clothes for your kids, may be a smart idea. If you start watching the sales now, you will probably be able to get your kids nice summer clothes for great prices. (A great way to save money on clothes is to shop online.)
3. Date Night. So many parents don’t make enough time for themselves because there is so much going on with the kids. And, when they do have time, it seems like there just isn’t enough money so they make the sacrifice and stay home. Set aside $100 or so and go on a date night together.
4. Vacation.Family vacations are important because they give the family time to reconnect with one another. Family vacations don’t have to be a week long or cost a lot. But, it’s important to make time to get away together, if only for a weekend. If your tax return is decent, put some back for a small family vacation this summer.
5. Pay off Debt. Another great idea for tax return money is to pay off debt with it. If you money racked up on a credit card and have enough to pay it off, then pay it off. That’s one less payment you will have to make every month. Paying off debt will not only take away a monthly payment, but it will also make you feel better about your finances – which can be a big relief.
6. Put some in Savings. Savings is not the same thing as an emergency fund. An emergency fund is not to be touched unless there is a real life emergency. Savings is different because it’s there for when something comes up and you need it. For instance, if you’ve been needing a new mattress and you find one on sale. You weren’t planning on buying it yet, but it’s too good of a deal to pass up…that’s what savings is for. Try to put at least 10% of your return in savings.