Put Your Tax Return Toward Your Financial Goals
We all look forward to tax refund season and imagining what to do with the extra money. It’s easy to get excited about all of the possibilities for fun ways to spend that money. It’s only natural to want to treat yourself when you receive extra money like your tax refund, or a bonus at work, commission payout, etc. It can certainly be tempting to splurge on a large or fun purchase! But it’s important to remember that this is your money that you worked hard for; it deserves the same responsible money management as any other income. That’s not to say you can’t have fun with your extra money, after all it’s your money to spend as you please! However, there are other ways to consider spending that money if you want to use it to help you achieve your financial goals. Here are a few ways you can put your tax refund toward your financial goals:
Pay Down Debt
One of the best ways you can use your tax refund is to wipe out or pay down debt. Putting extra money like your tax refund toward debt repayment will help you jump ahead in your repayment schedule, especially with high-interest debt like credit card balances or student loan debt. When you eliminate debt, you are relieved from continuing to make those monthly payments, thus freeing up more room in your monthly budget. Plus, wiping out debt means no more added interest, which can save you hundreds and even thousands of dollars over time. Even if you’re unable to pay off your debt completely with the extra money, putting as much of it towards repayment as you can will go a long way.
Save for a Down Payment
If you’ve been considering getting a new car soon, putting your tax refund toward your down payment will help you get closer to reaching that goal. If your current car is getting older, or if it no longer meets your needs, now may be the time to start planning for an upgrade. When you go ahead and start car shopping before you’re in a dire position with an immediate need to replace your car, that puts you in the best position possible to have plenty of time to do your research and weigh your options without being rushed or pressured into a decision. That way when you’re ready to buy a new car, you’ll know exactly what you want and will already be prepared with a plan to finance the vehicle and have your down payment ready.
Improve Your Home
Another way you can put your tax refund toward your financial goals is by using the money for any home improvement projects you may have on your list. Using your tax refund or any other extra money you acquire to improve your home is like a hybrid of spending and investing. You will be able to enjoy the benefits of your upgrades in the short-term, and you will be increasing the value of your home for the long-term, plus increasing its resell value down the line. If you’re planning on taking on a bigger project than your tax refund alone can cover, our Home Improvement Loan or Home Equity options can help you make up the difference so you can still tackle the projects you’ve been dreaming of.
Grow Your Savings
Any time you receive extra money, it’s always a good idea to give your savings an extra boost. Whether you’re saving up for a specific need, or just stashing away for your rainy day fund, the money you save now will add up for you to use in your future. Especially if you’re earning interest on your savings account, like with your Robins Financial savings accounts. Adding to your savings whenever you get the chance ensures that your money is there whenever you need it.
Start or Add to Your Emergency Fund
In addition to boosting your regular savings, using your tax refund to start or increase your emergency savings fund is also a great way to help you reach your financial goals. An emergency fund should have enough extra funds to cover you in the event of a major financial setback, such as loss of income, unexpected repair or medical bills, or other financial emergencies. The standard recommendation for an emergency fund is to have 3-6 months’ worth of living expenses saved up. That amount can certainly seem daunting if you are starting your emergency fund from zero, so using your tax refund or other extra money is a great way to get your emergency fund started or give it an extra boost to get closer to your savings goal. Consider opening a certificate account to help your emergency fund grow faster, like our Super Saver Certificate that has higher dividends plus one penalty-free withdrawal for when life throws you a curveball.
Treat Yourself
After all, your tax refund is your money that you worked hard for. Treating yourself doesn’t have to mean blowing your money on luxury purchases that you don’t need. You can put a portion of your refund aside to treat yourself with smaller purchases as a way to reward yourself for using the rest of your refund to help you achieve your financial goals. You deserve it!
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.