5 Thoughts about Tax Refunds
It’s tax season! Doing your taxes may be stressful and a bore, but the best part is that nice check that you may be receiving in the next few weeks. Tax refunds are great, and because of that, I have a few random thoughts about them that are totally unrelated to each other except for the fact that they’re about refunds.
1. Don’t use “instant refund” services. There is only one company that offers refund anticipation loans (Jackson-Hewitt) and this will be the last year that they offer it. They are high cost, high interest, and in the long run, not worth the instant gratification. That’s why there is only one left; the cost is so much that it’s almost absurd.
2. Consider getting it as a savings bond. Don’t have an immediate need for the cash in question? Consider getting a couple savings bonds with it. In 2010, the government made savings bonds an available option for taxpayers to receive their refund. Remember, this is an investment option, so you aren’t necessarily going to be able to get it in the next year. Make sure you really can’t use it right away before using this option.
3. Get out of debt with your refund. Got some debt that’s really weighing you down? Take advantage of the extra cash that you’ll have in your pocket and knock some of it out. As always, get rid of the highest-interest, “bad” debt first. Once you knock that out, your credit score can stabilize and your monthly payments can be greatly reduced. Good idea, huh?
4. If your refund is too big, consider changing some things for next year. See, if your refund is large, there’s a bit of a problem. Sure, some people like getting that big check at the end of the year, but you need to realize that you are, essentially, giving the government a big, fat, no-interest loan. You can elect to have less taken out, you can change the number of dependents you have, and do a myriad of other things to make sure not so much is taken out this year. Sit down with your tax professional or the payroll professional at your place of employment and discuss your options.
5. Don’t feel like you have to spend it right away. This kind of goes with my thoughts on savings bonds, but takes it a bit further. Put it aside for your kids, for your education, for your retirement. It’s not money that absolutely must be used right away. It’s your money, you earned it and now you can use it as you wish and desire. Put it aside if you aren’t digging out of deep debt and watch it grow for the future.
Ready for your tax refund now? I know I kind of am. So, consider it carefully, utilize it wisely, and, as always, spend smart, save smart! Have a great weekend and we’ll see you back here next week.