Have you filed your taxes yet? You are not alone. A large portion of Americans wait until the last minute to file their taxes, spending hours in line at the post office to ensure their envelopes are postmarked by April 15th. Once you do get around to paying your taxes, you might be one of the lucky people who is entitled to a tax refund. Now, where do you spend that money first?
Your first thought is probably, “Spring break in Cancun!” and that’s normal. Maybe you don’t even think about doing something responsible with it. Or maybe you do think about doing something responsible but that thought quickly leaves your mind when you see that new PS4 game on sale. My advice? Do a little of both. I take the majority of my tax refund and do something responsible with it. I’ll put some in my savings account and I’ll use some to pay off my credit card. But every year, I make sure that I take a portion of my refund check and do something fun. Every year is different. Last year, I bought some new clothes. This year, I went away for a cheap weekend in D.C. (tip: sharing the cost of a trip with friends really cuts down on the cost).
As with any money that comes into your hands, pay yourself first. This applies to refunds, birthday money, or paychecks. Make yourself a ‘bill’ that you have to pay and pay yourself by putting the money into a savings account or a piggy bank. Hide it under the mattress if you must, just pay yourself first. This will really help you build up your savings account for your ultimate spending goal or life’s little emergencies.
Now remember, that tax refund is actually money that YOU over payed the government throughout the last year. You are basically giving the government an interest free ‘loan’ and they are paying you back. Some people like overpaying because then they are guaranteed a refund the next year. Some prefer to have a little more money in their paycheck each time and not get a refund. Figure out which is right for you and make sure that you are set up accordingly with the payroll department where you work. Here are links to the pros and cons for each option. Read through those two, do a Google search for more information and make the decision that fits your life.
Did you get a refund? How did you spend it? Let me know in the comments!