The day you receive your tax refund feels like Christmas morning as a seven-year-old — gifts galore! Unfortunately, many people will spend their tax refund as a windfall and it’s out the door before you know it. Take the time to learn about all of the options you have when considering how you will spend your tax refund.
- Emergency Fund – Certain situations will arise where you will need a large sum of money fast. Your car could need repair, you could be admitted to a hospital, or you could need to hire an attorney; all of which do not come cheap. A proper emergency fund has at least $1,000 dollars should be established before anything.
- Clear a Debt – Using a tax refund to lower a credit card bill is is good, however, paying one completely off is better. Clearing a complete debt will leave you with one less bill due at the end of the month.
- Planned Purchase – Letting the money sit in your checking account might be too risky because it could entice you to buy something on a whim. Instead, put the money aside for a purchase you will need in the near future. Use it to purchase a new furnace, washer, dryer, down payment for a car, etc.
- Experiences – Studies show that people who spend their money on experiences rather than material possessions will be happier in the long run. So if your current financial situation isn’t looking so bad, spend your new found money by travelling like you’ve always wanted to.
- Half n’ Half – It’s hard to spend your money 100 percent responsibly when there’s so many places you want to go and things you want to buy. Take your money, split it down the middle; responsibly spend one-half, and go to town with the other! Being half-responsible is better than not being responsible at all.
Spending your tax refund should be done wisely with a few factors kept in mind. If you haven’t finished filing your taxes just yet, contact the accountants at Berkow, Schechter & Company LLP. To learn more, or to schedule an appointment, give us a call at (203) 356-1061.