How to Spend Your 2013 Tax Refund
What To Do With Tax Refund Money?
For some, getting that refund check in the mail means immediately going out and purchasing that big ticket item you've been saving for! Many Americans view it as free money sent their way by the government. However, in my opinion, this refund check can be used in a lot more fiscally responsible ways that will really pay off leaving you with even more cash in the future. The purpose of this hub is to simply name a number of things this money can be used for. No matter how hard it is not make that impulse buy, hold off for just awhile and take a look at my other uses for the refund instead.
1. Pay off credit card debt. This seems boring, but paying off debt can leave you much richer very quickly depending on the interest rate that you are paying on your debt. Pay your debts first, and then you will have more cash to spend later.
2. As Dave Ramsey lays out in his Baby Step #1, the amount of a tax refund is usually the perfect amount to rebuild or create your emergency fund. An emergency fund should consist of $1000 initially that can be used for any unexpected expenses. A specific fund for emergencies allows you to stay out of debt when life throws a curve ball in your direction.
3. If you've taken care of both #1 and #2, I suggest you add the refund check amount to your retirement IRA or use this amount to start and fund a Roth IRA. I prefer the Roth over a Traditional IRA because of the flexibility it provides in being able to withdraw contributions without a tax penalty, and you are not required to withdraw funds at a certain age like all other retirement accounts require. This allows to you to transfer an entire Roth IRA account to an heir or beneficiary.
4. Invest in your children or grand children's future by purchasing stock of a company through a DRIP. A DRIP is a dividend reinvestment plan. A DRIP is a great way to get your kids excited about investing, and it provides a cheap way to purchase stock and watch your investment grow through dividends.
5. Pay off your home mortgage. This goes back to my first point on the importance of being debt-free, and a fully owned home gives you a larger paycheck to use however you want. The quicker the home mortgage is paid off, the less interest your paying to the banks.
6. Use your refund to purchase some sort of unique investment that supports one your hobbies. For instance, I enjoy collecting coins and antiques. I would consider the purchase of a nice silver coin a worthwhile investment for both my hobby and the potential for a return on my investment in years to come.
7. Pay off any remaining interest such as that on a car or student loans.
8. Use the refund to make monthly budget adjustments where needed. For instance, if one expense category of your monthly budget consistently goes over, then allocate the amount of your tax refund to the whole year and increase that category by that amount per month.
Will you implement any of these ways to spend your 2013 tax refund in 2014?
My Other Hubs on Money
- How to Effectively Save Money
Finding ways to make some extra cash on top of your regular income is not as difficult as it seems. Here are 10 ideas that will provide you with a substantial side income when the going gets tough.