It’s tax season so for many Americans it’s also tax refund season. Tax refunds may seem like a windfall, but with some well thought out planning you can use your tax refund to reach your financial goals. While you may find yourself tempted to splurge on vacation or buy a new wardrobe I have lots of practical ideas for spending and saving your refund. Even if you aren’t getting a refund this year you can apply the same idea to any money you receive.
10 Ways to Spend & Save your Tax Refund
1. Knock out debt: If you have high-interest debt like credit cards this should be your first choice. Paying off debt will create more money in your monthly budget and you’ll save a small fortune by not paying those high interest rates.
2. Beef up your emergency savings: Emergency savings are always helpful to have. You never know when you’ll need to replace your furnace or get lose your hob. The more you have saved the more comfortable you’ll feel when life throws you a curveball.
3. Pay down loans: You’ve already spent the money on your education or home, so pay it back by putting your refund towards those loans. Not only will it help you reduce the number of payments, but it will feel good to make a dent (no matter how small) in your loan balances.
4. Invest: Investing money is the ultimate way of paying yourself back in the long-term. Put your tax refund in mutual funds or buy stocks to help you earn even more in the long run.
5. Donate: Consider donating a portion or all of your refund to a charity or nonprofit. It’s a great way to give back at a time when most charities are receiving fewer donations.
6. Save your refund for retirement: Every dollar you save now can have a huge impact on when you can retire in the future, so consider putting your tax refund into an IRA. Not only will you be saving for your future, but you may get a tax deduction for 2015, too.
7. Save your refund for college costs: When you put your refund into 529 plans for your kids (or future kids) not only will it continue to grow, but you may also receive a tax deduction for 2015.
8. Treat yo self (in moderation): Like Donna and Tom it’s okay to have times where you treat yo self even with your tax refund. Set aside 5-10% for something fun like a spa day, dinner out with your spouse or partner, or those new shoes you’ve had your eye on.
9. Add your refund to savings: If you have different savings buckets (vacation, holidays, etc.) then you can add your refund to your savings or break it up between various goals. For instance, if you’re saving up for a new home you may add it to your house downpayment savings account or if you are saving up for next holiday season you can sock it away and know you’re that much closer to a great holiday.
10. Buy a Car: If you’re in the market for a used car you can put that refund to work as a downpayment on your next car or add it to your car fund for when you’re ready to make pay for it in full. A solid downpayment can help you reduce your car loan rate significantly and you could just walk off with the keys to your dream car sooner than you think.
If you’re considering purchasing a used car take a look at DriveTime, the largest used car dealer in the US. They help people find and finance vehicles if you have credit issues. They currently operate more than 120 dealerships in 21 states.
You can learn more about DriveTime at their website. If you’re in the market for a used car you can use their excellent search tool to help you find exactly what you’re looking for at a price you can afford. If you’re ready to shop you can get approved online before you buy. Still considering what to purchase or when to buy? They have a blog full of great info you can use to help educate you about the car buying process.
This is a sponsored conversation written by me on behalf of DriveTime. The opinions and text are all mine.