Some people really enjoy tax time. They want their big refund from the government. This year, instead of rushing out to buy something you really want, I want you to consider some other great options.
1. Pay off some debt. Whenever I get a refund, this is my first option. If you pay an extra payment on a loan, it reduces the interest you pay by just a little. It also gets you one payment ahead. Then, if an emergency comes up later in the year, you might be able to skip a payment on this debt. Also, I think the best way to pay down your debt, is to spend extra money on it. Even ten or twenty dollars here or there, could pay off big at the end of a loan.
2. Start emergency savings. It is always a good idea to have 2-3 months of income in your emergency savings. However, start small. Don’t get overwhelmed. $1,000 of savings is a lot better than none. Whenever something comes up during the year, don’t hesitate to use this account. But, put the money back in as quick as you can. This should be a top priority to keep this at a consistent amount throughout the year.
3. Plan for the year. If your savings is good and you’ve been working hard on your debt, you could look forward to the year. If your insurance bill is due in the summer and you save money by paying it in full instead of monthly installments, start saving now. If you have needs that are coming this year, why not start a separate savings account for those items?
It is always tempting to run out and spend your tax refund. But, if your goals this year include getting your budget on track, receiving your tax refund is a great time to start. Budgeting doesn’t need to be overwhelming. Start with one goal at a time.