It’s April and tax season is upon us. As you gather your W-2s, 1099s, 1098s and other tax documents to complete your tax return or provide them to your tax preparer, you are probably hoping to receive a tax refund instead of owing additional taxes. As you visualize that tax refund check, you are probably also wondering how to spend it. Instead of spending it on something you don’t need or just splurging it. Why not use it to help you begin your journey to simplify your finances.
Here are a few ways you can use your refund check to help you simplify your finances:
Start an emergency fund or add to your existing emergency fund - having funds available for the unexpected is key to simplifying your finances. So establishing an emergency fund with your tax refund or just replenishing your emergency fund will help you to simplify.
Open an IRA – outside of your 401k this is one of most convenient ways for you to save for retirement. You can use your tax refund to fund your account. Maybe take this year’s refund check to make your 2014 contribution if you have not already contributed this year.
Open an investment account - if you have already established an IRA and have fully contributed for this year, use this year’s refund to open an individual investment account.
Payoff or pay down credit card debt – Whenever you have an opportunity to eliminate or reduce your credit card debt you should. So applying your tax refund to any outstanding debt will benefit you and help you simplify things. The less debt you have the better your financial picture will become.
Pay down your car loan or student loan – if you have no credit card debt, why not knock out your outstanding car or student loan debt with your tax refund. It’s better to try to reduce this as soon as possible.
Make additional mortgage payment – why not apply your tax return fund to your home mortgage. I know it may not make a big dent in your mortgage balance but every little bit counts.
Have your Will written – Doing this Will not simplify your current financial situation but will help your family simplify things upon your death and enable you to control how your assets are distributed. So using your tax refund to draft your Will or updating it will help simplify things and reduce the stress on your family.
Purchase budgeting software -Having a good budget will help you simplify your finances but you may need a little help to stay on track. Why not buy budgeting software to help you with your tax refund?
Start kid’s savings account – What better way to teach your kids about saving by using your tax refund to start them an account.
Start kid’s college savings account – Now you have some extra cash why not use it to start your child’s college fund or if you already have one add the refund to their existing account. The more you have saved now the less you will have to budget for in the future.
Save it for vacation – I will assume you plan to take a vacation this summer. Why not take that tax refund and use it toward for your vacation.
Save it for holiday shopping – We are still months away from the holiday season but with some extra cash from your tax refund why not save it for the holidays. Maybe even begin your holiday shopping now. It will be less stress on you and your budget if you plan ahead or buy several months in advance.
I am sure you can find a few other ways to use your refund to help you.
What do you plan to do with your refund check to help you simplify your finances? I would love to hear from you.
Til next time take one step at a time to simplify your finances. Simplifying is not a sprint it is more like a marathon so pace yourself.