Tips like these helped us pay off $127K in debt. You can read our story in Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After.
It is a blessing indeed to have cash that you didn’t anticipate find its way to you. Whether it’s a bonus, a tax refund, a gift or inheritance, you feel sheer giddy at the mere mention of dollars and cents you didn’t expect to have in your pocket. And it might even begin to burn a hole in your pocket before you get your paws on it. HOLD UP . . . WAIT. You’ve got to do some thinking before that extra do-re-mi does a disappearing act, leaving you wondering where it went. Without further ado, the five absolute best ways to use your tax refund.
Start An Emergency Fund
We all know that trouble will eventually find us, whether it takes the shape of a flat tire on the side of the road or an unexpected illness. You need to sock away money to head off the pitfalls that could snare your foot on a future day. Most major expenses – an appliance repair, new tires, dental work – fall between one to two thousand dollars. Set that amount aside before you do anything else. Your best financial efforts can be thwarted if you’re not prepared for the unanticipated.
Pay Off Debt
Face it. I’m the girl whose family paid off $127K in debt in just under four years. I’m always going to tell you to make paying off debt a priority. By the way, I’d love to let you in on a little secret. From April 6th – 8th, you can get Slaying the Debt Dragon in its eBook format for only $2.99. No matter your platform (and by the way you can use your laptop, smartphone, or tablet as an eReader if you download the Kindle app), the book will be available for $7 off its retail price for three days only! The book shares our story along with practical tools for you to begin your own debt slaying journey – a perfect quest to begin with a tax refund.
Buy Things You Need
This is tricky because defining needs and wants can be dangerous territory for even the most stalwart of spenders. When I say need, I mean your shoes are falling apart or your towels have holes in them or you’d like to stock up on toilet paper. Sit down and brainstorm a list of your needs with your spouse and then rank those items in order of importance. You might not get to all of them with this refund but the next time unexpected funds arrive, you’ll already have a punch list.
Don’t Put the Money In Your Checking Account
The number one way for your tax refund to vanish would be if you deposited the money straight into your checking account without a plan. Hear me well, debt slayers, you will spend every penny and not know where it went. I often joke that if you leave extra dollars in your checking account, they will grow legs and walk to Target. So if your refund is directly deposited into your account, take extra pains to withdraw it in full or put it into other less accessible accounts – like savings accounts.
Splurge
I’m not a complete killjoy. I love a good glass of iced tea. I enjoy a meal out on the town. It’s OK to take a portion of your refund to splurge. But set a specific amount, withdraw it in cash and then stick to those boundaries. Sometimes a minor splurge can curb our appetite to spend just enough that we don’t unexpectedly reel out of control. So go ahead. Live it up. Just a little bit. And then be responsible with the rest.
There are plenty of other great ways to use your tax refund, like giving away a portion or saving toward a longterm goal or vacation. Don’t forget that you might also need to pay a tax professional out of the refund, too.
What ways would you suggest others use their tax refund to promote financial health?
My book is now available: Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After. You can also check out Inspiration to Pay Off Debt: 30 Days of Encouragement from the Queen of Free
This post contains an affiliate link. That means when you get a great deal or maybe even something for free, you also help our family pay off our mortgage early. And for that, we royally thank you!
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