We’re back to taxes again?
Yes, but this is the happy part of taxes: the long-awaited refund check!
According to the IRS, the average tax return last year was $2,899. Nearly $3,000—that’s a lot of money.
Do you have some ideas about how we should spend it?
You bet I do! According to a 2012 survey by TurboTax, many people say they are being responsible with their tax refunds: 42% plan to use the money to pay down debt and cover bills and 25% plan to save it. But others are splurging: 15% of taxpayers plan to treat themselves to a vacation or shopping.
If you’re one of the people lucky enough to get a substantial tax refund this year, be smart about how you spend it. Remember, even though it may feel like “found” money from an unexpected windfall, you earned that check by working hard—the same as you do every other paycheck, so don’t blow it on 2,899 lottery tickets.
Top priority: Pay off your credit card. It’s far and away the smartest thing you can do.
Next: Maintenance work. Schedule those car repairs you’ve been avoiding –new brakes, tires, a tune-up, oil change—you know the drill.
Or maybe you have house repairs to do? Use the money to pay for removal of storm-damaged trees, and have some replacement trees planted with any leftover money.
Or take that money straight to the bank. Do you have a rainy day fund? Everyone should have at least three months living expenses in a secure savings account.
What if I’ve already done ALL those things?
Well then we can have a little fun! My first suggestion would be to put the money in the bank, so to speak. But this time I’m speaking figuratively. Don’t put it in the actual bank, but invest the money in your future. That means opening a mutual fund account or how about opening a Roth IRA if you qualify for one? The earnings grow tax-free, meaning you can reap the benefits in retirement without having to give a slice of the pie to Uncle Sam.