You might have been waiting for this time of the year to buy something that you wanted especially that with national average refund is at $3,000 this year, it is rather big. Firstly, congratulations! Now, how should you wisely spend it? Just remember this is not a “bonus” check the government sends you but in reality it has been yours all along. If you have filed your taxes and want an update, see my other post on how to check your tax refund status.
Don’t get caught treating this money differently than you do on your day-to-day life. This year, try a new way of spending tax refund check, or in other words give this check a purpose. Think about how you are doing financially currently especially if you are a student. Don’t go out and buy that phone you wanted so bad because if you are smart you will not have the latest and greatest or buy that exotic vacation for spring break coming up.
Here are top 7 ways spending tax refund wisely this year:
1. Paying Down Your Credit Balances (Student Debt, Credit Cards, Car Loan, etc..)
Top Financial Experts are saying that this should be your priority. If you have a credit card(s) with balance(s), paying those balances off should be your first priority. Why? Because on average this is where people rack up most of the debt and with the interest you are paying it all adds up in the end. So, find your highest interest balance and pay it off!
2. Plan on Starting/Increasing Emergency Fund
Did you know that average American doesn’t have $500 as an emergency saved? It is a very disappointing statistic and it only means that in case of emergency whether it is a loss of a job, car breaking down, or any other unexpected expense you will most likely get sent towards financial disaster. Don’t be like an average American, even a little contribution from your monthly paycheck will go a long ways if anything were to happen.
3. Start an Investment Account for Your Retirement
If you don’t have one yet, get your savings account started and start thinking about your future. By doing it as early as possible even by little amount you will have a rewarding return.
Let’s put it in numbers: investing $100/ month for 30 years with average rate of return you will have $186,000 after 30 years. Now, this is not enough to retire, but imagine if you double or even triple that amount monthly, you will be a millionaire before you know it. So, get started now on your future.
4. Try Rule 10/90
Let’s take a break from the things we should do with the money and focus on us on this one. There’s a rule that you can try if you want to enjoy some of that refund. Try a rule 10/90, let’s further analyze this: firstly, you take the 90% and make a smart move with it like I’ve mentioned in the other choices above, then for the 10% you go and have fun, get that gadget you wanted, weekend getaway, or that park you wanted to visit followed by a fancy dinner, in other words enjoy yourself. (In numbers? At average $3,000 refund you smartly decide what you do with (90%) $2,700 and for the (10%) at $300 you enjoy yourself.
5. Donate and Reduce Your Taxes
If you like some charity or have been following one, donate some or whatever you decide on. This is another smart move because not only you are helping (you will feel good about yourself), but you are also reducing your tax bill by claiming tax reduction
6. Got a Business Idea? It’s time get it started or running
Have you had this business idea for a while now, but didn’t have any capital? You can use this refund to make another big step. It is a great idea to turn this money into money that will come back to you. You can also claim few small business tax deductions for next year as well.
7. Spending Money on Something that You Need
Your car needing service? In need of important dental work? You need to take care of those essentials in life because this could lead to a bigger bill later. Well, now you can with the refund you receive to cover those necessary costs.
Try a new strategy with you tax refund this year. Being a student is already rough from financial perspective but doing smart and right things here and there will only help you for your successful financial future!