Top 5 Tax Refund Tips
This is the week for the submission of taxes. If you expect a tax refund, now is the time to consider what you will do with the monies. Don’t let the joy of the moment overshadow good judgment. Perhaps there are some things you should consider doing with the money to give you long term results instead of allowing impulse purchases providing short term enjoyment and little peace of mind.
Dr. Michael Gutter, UF/IFAS Financial Management Specialist recently reviewed some ideas with me of which I want to pass on to you. Think carefully about the decision of how to spend your refund money.
- Get caught up on any bills you may be behind on. Missing payments often results in fees or penalties whether it is a utility or credit card.
- Pay extra or pay down any outstanding credit debt – the average interest on a credit card is typically higher than average investment returns including the stock market. Therefore it may be faster to build wealth by decreasing debt than by simply putting the money into a savings account.
- Invest the money for yours or your children’s futures – if you have children that you would like to help with college, placing this money into a college savings account such as a 529 plan is a great investment in your children. If they do not yet have an account set up, this is a great time to consider doing so with money that you did not expect. Remember that you can also use form 8888 to split your tax refund and take some of those funds and add to your savings as well.
- Purchase something that you need – whether this is a part for your car or something you need for your home. Using this rebate to buy something you need may allow you to later use your regular income to buy something you want. But remember take care of your needs before your wants.
- Purchase something that the whole family wants – assuming you don’t need to do any of the above, buy something the entire family would like to have. Consider using it to take a mini-vacation even if just for a day to spend some quality time with loved ones. This is something we often feel we cannot afford to do with our regular cash flows so this may be an incentive to invest in your family.