We try really hard to not get a tax return each year. For the last several years, we’ve usually had to pay some money on April 15, which is fine with us – that means more money for us throughout the year.
For many people, March and April means that a sizable check will arrive in the mail. When that check arrives, it can be really tempting to use it for a splurge – and it’s fine to use some of it for a splurge.
If you use all of it up, though, you’re going to find yourself missing out on an opportunity to genuinely improve your financial situation over the long haul. You can transform that tax return money into something that will contribute to your peace of mind for quite a while. In fact, it can help you out forever if you continue to make reasonable decisions further down the road.
Here are ten things you can do with your tax return check that will help you out financially over the long haul.
Pay off debt
If you have any outstanding debt, it never hurts to toss your tax refund toward paying down that debt. Choose the debt with the highest interest rate (typically a credit card) and try to pay that debt off in full. If you can’t, simply make an extra large payment toward that debt.
Buy bulk items
Use that extra cash to stock up on sensible bulk items, like household products, hygiene products, and non-perishable foods. Filling up your pantry with beans and rice and stocking your bathrooms with toilet paper is a great idea because you’re buying them at a cheaper rate than you might otherwise be able to afford.
Save for a major purchase, like a car
If you know you have a major purchase coming up, like a car replacement, take your tax refund and stick it in savings. That way, when you need the new car, you can trade in what you have and add the tax refund money on top of it. This might even spare you having to take out a loan to replace the car.
Fix up your home
This is a particularly good idea if you think you may be selling the home in the next few years. Roll the cash into fixing up your kitchen, improving up the landscaping, remodeling a bathroom, or taking care of some outstanding minor repairs. It not only makes your house more enjoyable to live in, it will also improve the value of your home should you choose to sell it.
Start (or bolster) an emergency fund
Everyone should have at least two months worth of living expenses sitting in the bank just in case of an unexpected emergency. Your income tax can provide that for you. Just slide the cash into a savings account and forget about it until a major crisis comes up. The next time you lose a job or your transmission fails, you’ll be incredibly glad you have that cash.
Take care of irregular bills, like insurance
Homeowners insurance. Car insurance. Property tax. Automobile licenses. All of these things are irregular bills that can turn a regular month into an unexpected financial challenge. Use that tax refund to put money aside for these bills so that when they come up, you’re not caught without a plan.
Pay for a healthy term life insurance policy
If you have dependents, you should have a term life insurance policy to take care of those people if something happens to you. It’s a painful thing to think about, but simply taking care of this little detail can help you sleep a little better at night knowing that your loved ones are taken care of.
Fund a Roth IRA
Feeling behind on your retirement savings? Take your tax refund and use it to fund a Roth IRA so that you can play a little bit of catch-up on retirement. It won’t magically rescue your retirement, but it can help make a difference between a difficult retirement and an enjoyable one. If you put $3,000 into a Roth IRA at age 35, it has thirty years to grow into something that can really help at the end of your career.
Save for your children’s college education
Open up a 529 fund for your child and seed it with the money from your tax refund. That money will grow over time and when they’re ready to take on educational opportunities after high school, they’ll be able to do so while worrying a little less about loans and financial concerns.
Invest in yourself through education or other lasting personal improvement
Take some classes. Work toward a new degree or a new certification. Learn a new language to a conversational level. All of these things can improve your career opportunities, which can both improve your income and open the door to beter jobs.
Your tax refund is an opportunity. Take advantage of it.