If you are expecting a tax refund this year, you may be tempted to splurge. The IRS issued nearly $324 billion in tax refunds last year, with the average refund totaling $2,895. When a refund comes your way, it can be tempting to spend that money on something you would not ordinarily be able to afford. But before you start dreaming of a new wardrobe, planning an expensive vacation or researching the latest tech gadgets, consider these ideas to help your tax refund pay back even bigger in the areas you need it most.
- Build Your Emergency Fund
According to a recent article from CNBC, financial expert Suze Orman advises having 8 to 12 months’ worth of income in a savings account you can access in an emergency. If you don’t have that kind of money stashed away, you are not alone. The same article reports that 69 percent of Americans have less than $1000 in savings, and 34 percent have nothing in the bank at all. If you are getting a tax refund this year, consider putting it in the bank. If you lose your job, need surgery or require major car repairs, that money could be a real lifesaver down the road.
- Invest in Your Health
According to Diana Farrell, President and CEO of the JPMorgan Chase Institute, consumers are increasingly using their tax refund checks to pay for medical expenses. Says Farrell, “If consumers have a health need at some other time of the year, they might have to delay treatment until cash arrives during tax time.” Their study indicates that among those who file early for their refund spend an average of 64 percent of that money on health care. If you’ve been delaying treatments due to finances, investing in your health may just be the best use for your refund, too.
- Get Needed Car Repairs
Without a car that works, you might find yourself suddenly unable to get to work, school, or medical appointments. An ounce of prevention is almost always worth a pound of cure when it comes to car care. If you haven’t had a tune up in a while, maybe now is the time to use your refund to do it. Proper car maintenance doesn’t have to cost a fortune. Even with a small refund, you can invest in a few must-have items to do some regular car care yourself. Check out these do-it-yourself car care tips.
- Invest in Your Career
If you’ve been thinking about advancing your career through higher education or job skills training, a tax refund might provide the springboard you need. Maybe a technology training class or two would help make you a candidate for a better paying role with your current employer. Or perhaps going back to school would help you prepare for a better paying career altogether. You don’t necessarily have to foot the bill alone, either. Some scholarships are available for adults wishing to go back to school.
- Stock the Pantry
There are plenty of non-perishable items you buy throughout the year that, if purchased in bulk with your tax refund, might help improve your cash flow. Buying in bulk is often much less expensive than purchasing the same item in smaller quantities. Consider bulk shopping for paper towels, toiletries, canned goods, pasta, and more. A club store designed for bulk shopping can be one place to start, but many of these charge an annual membership fee. Boxed.com is an online retailer specializing in the home delivery of bulk items without an annual fee.
- Pay Down Debt
If you are not in a position to save money right now due to looming bills and credit card debt, a tax refund could be just the jump start you need to get out of debt and back on your feet financially. Follow these three essential steps for getting out of debt, and you just may find your refund gives you more than a fun spending spree this year—it could give you real peace of mind. And there’s no price you can put on that.
A chance to get ahead
Whether you are expecting just a small refund, or even if you have a lot of cash coming your way, remember—a penny saved is more than a penny earned. It’s a step toward financial freedom. Sure, it’s fine to hold some money aside for a little fun spending—after all, you’ve earned it. But the money you set aside now for a rainy day just may help ensure that when skies get gray, your forecast keeps looking up. If you invest it, use it to pay off debt, or spend it wisely, a tax refund provides an opportunity to improve your financial situation and maybe even get ahead.