KJ: With the average tax refund for 2012 coming in at a whopping $2,803 – just shy of the average for 2011 that was even higher at $2,913 – what should you do with your income tax refund? With this very significant sum of money that many families receive, it’s time to reflect on some smart money tips…so, here’s my list of super fun adult things to do with your tax refund. Okay, so maybe “super fun” was misleading for some of these…but hey, in the long-run, heading the advice of the first few before looking at the options that follow will allow you to live financially secure sooner and enjoy much, much more than you thought possible!
Pay down debt – the bad kind
Seems easy, right? If you have some of the bad debt – ongoing credit card debt, lines of credit, etc. – then this should be stop number one for your to apply your income tax refund.
Pay down debt – the better kind
Usually within this category falls home loans, so consider taking a chunk and paying down your mortgage a little bit quicker. If you still have a car payment, then consider making a dent in that loan to get it paid off quicker, so you can start applying that monthly payment toward your goals!
Fund your emergency fund. If you haven’t already begun saving to it, then start it up now! Get it to $1,000 as soon as you can, then work to $5,000, and then 3-6 months of your living expenses. If you’ve done all this (woohoo for you!), then consider saving more to your retirement accounts or investment/brokerage accounts.
Invest in yourself
Class – or certification – you’re interested in that will help further your career to increase your “human capital” – i.e. earning potential. The payoff in the long-term may surprise you. Plus, many companies reimburse you for those relevant classes and certifications, so think of it as just a temporary deposit that will be returned to you.
Replace that shoddy appliance
So again, not as fun, but it can be! Our vacuum cleaner went kaput a while ago, and we decided it was time to retire our existing one once and for all.
Maybe your fridge is on the fritz. Might be time to invest in a newer, more energy efficient model. You might be surprised what monthly energy savings you would have by getting a newer model!
Pad your vacation fund
Maybe a nice relaxing getaway is what you and your significant other need. Hopefully this year’s refund can get you closer to those relaxing days on the beach sipping [insert drink of choice]!
Buy energy efficient light bulbs
Time to upgrade those crappy bulbs that die every couple years with some energy efficient lightbulbs. LED are the latest craze for energy efficiency. We’ve bought a lot of the Cree lightbulbs for our house, and it’s made a huge difference on our energy bills. Not only do they burn about 1/6 the energy, they last much longer than regular lightbulbs, plus they also produce less heat which indirectly means less cooling costs in the summer! A bit of an initial investment, but if you’re going to be in your house for a number of years, then it will be well worth the investment!
Pay it forward
Consider paying it forward. Donate to your favorite charity or use it to support someone in need. Not only will you feel good about it, but chances are it may help your tax bill this year too – win/win!
- What will you be doing with your income tax refund?
Have you already spent it?
What do you typically do each year?
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