By Angela Wills
Although many abhor the thought of filing taxes, those receiving refunds find tax season to be much less taxing.
Last year’s filing season reflected the average refund amount of $2,797. A refund of that amount is enough to buy five or six Samsung Watches, eight PS4’s, treat yourself to a luxury vacation or why not splurge on concert tickets to see Beyoncé?
There is usually a popular trend to “spend while you can” during tax season. People tend to buy the more expensive items that they couldn’t originally afford or at least, didn’t want to pay for out of regular earnings and the urge to do so is much stronger once the refund check arrives. However, it’s essential to examine your financial standing before blowing your tax refund on the nonessential items.
Before you cash or deposit that refund check, take a moment and devise a plan of action for your tax refund. Once it hits your account, it becomes subject to frivolous spending habits such as, expensive coffee (that you don’t normally buy), dinner dates and road trips. The money will disappear and you’ll have nothing to show for it and your debt will have increased instead of decreased in many cases.
Take the money received to apply towards negative financial situations you’re having in life or to invest in opportunities that will help to improve your financial status.
Pay on Outstanding Debts
No matter how small of a tax refund you receive, applying a portion of it to an outstanding debt such as a car payment, mortgage payment, credit card balance or other loans works in favor of helping out the principal loan amount. If debt woes consume your entire thought process, it may be a great idea to contribute the entire refund check toward paying off some or all of the debt owed.
Pay Into the Emergency Fund
Experts say that everyone should have at least three to six months’ of money saved in an emergency fund. However, most people don’t have this amount and some don’t have any at all saved towards this type of fund.
With no emergency fund in place, you’re vulnerable to many unexpected unfortunates such as medical emergencies, unexpected unemployment, car expenses and the list goes on. Establish a $1,000 cushion by depositing some or all of your refund into an account of this type.
Your tax refund is a great tool for investing as sell, no matter how small the amount is you’ve gotten back on your return. Investment options vary from small to large and include individual stocks, dividend investment plans and mutual funds. Try some of these investments with your tax refund.