Smart Ways to Use Your Tax Refund

Will you receive a big tax refund from Uncle Sam? The answer depends on your withholding.

Withholding Strategically

On your Form W-4, you may make allowances for yourself, your spouse and your dependents. For every allowance you take, less money gets withheld for federal taxes and more money gets added to your paycheck. For those of you who want - or need - the extra cushion each month, this is a smart move. However, it you're more likely to save or invest your tax refund than you are to save or invest a portion of your paycheck, receiving a tax refund may be a great strategy.

To ensure you withhold just the right amount, use the IRS Withholding Calculator and submit a new W-4 to your employer if needed.

6 Money-Smart Uses for Your Tax Refund

If you are expecting a refund this tax season, consider these six tips for using it wisely:

1. Pay down credit card debt. First, attack the card with the highest interest rate. If you can pay off the card in full, that is even better.

2. Build up an emergency fund. Tuck some of that tax refund into savings. Even a modest amount - as little as $500 - can help soften the blow of typical unexpected expenses. If you already have an emergency fund, give yourself an extra boost toward reaching that three-to-six-month-living-expenses recommendation.

3. Invest in a retirement plan. Enhance your future now by using your tax refund to invest in a tax-deferred retirement plan. If you have an individual Retirement Account (IRA), make a one-time, sizable contribution, or save your tax refund for a series of smaller investments over several months.

4. Prepay your mortgage or loans. For homeowners with hefty monthly mortgage payments, give yourself some breathing room by using your tax refund to pay ahead. For nonhomeowners, contribute to your car loan or student loan, or prepay on your insurance premium.

5. Be good to your car and your home. Spend your tax refund on costly, but necessary, repair to your home or vehicle. Replace that leaky roof or buy new tires for your car.

6. Treat yourself. If you've covered all of the above, then reward yourself - but do so responsibly. Spend your tax refund on a well-deserved vacation or buy yourself that flat-screen TV or smart phone you've been eyeing. Just be sure to maintain your fiscally savvy ways by finding the best deal.

Comments

The Best Way To Budget? Try Pen And Paper -- How Bullet Journaling Can Fix Your Spending

Bullet journaling is a new and trendy way to track your spending. Using pen and paper can make you more active in your budgeting and can be fun too. Here's how to start keeping a bullet journal. You can hear it in the swell of retro-inspired music. You can see it in the resurgence of vinyl records and vintage cameras. You can feel the hum of simple circuitry in the air. Analog is back. Analog products fill a very real, very legitimate desire to untether from the digital world we've been enslaved by. In a society where the speed of information is ramping up at an exponential rate, the world of analog is a reminder to slow down and connect to your surroundings. The analog approach can be implemented in a variety of ways -- even budgeting. The bullet journal community has embraces this pen and paper approach to money-management, developing simple and time-saving methods to track and organize your finances offline. What is bullet journal budgeting? The goal of bulle...

How to Avoid Debt Consolidation Scams

If you're in significant debt, the prospect of becoming rent-free can be alluring. So alluring, in fact, that you might find yourself caught in any number of scams along the way. One common way to pay off debt is through consolidation. This involves combining all your debt and taking out a loan that goes toward paying it off each month. Debt Consolidation can help simplify and streamline the debt payoff process, and it might even save you a little bit of money, too. Still, the debt consolidation industry is rife with scams. Companies might say they offer debt consolidation when, in reality, they're for-profit debt settlement companies looking to take advantage of people. Warning signs of a debt consolidation scam When you're searching for a way to consolidate and pay off your debt, you might come across companies online that promote debt consolidation. But some of these companies aren't offering to help you with debt consolidation. Instead, they're d...

How to Recognize the Signs of a Gambling Problem

Whether it's buying a weekly lottery ticket or taking an annual trip to Vegas to blow off some steam, gambling is a fun and harmless diversion for many people. For others it can become a problem that creates a variety of issues, including extreme financial hardship and deep debt. Let's take a look at some of the tell-tale signs of a gambling problem. When Gambling Goes Beyond Entertainment Win or lose, gambling should be nothing more than a fun activity. When it stops being fun and becomes something that dominates your thoughts or conversations, that's a sign it's becoming a problem. Gambling with Money Meant for Other Things It's one thing to have a few dollars set aside every week for lottery ticket or putting a line item in your entertainment budget for a trip to the casino every few months. It's something else entirely if you're gambling with money intended for other things like rent, food, and paying bills. Gambling with money originally planned to c...

Greatvest Tools

Search This Blog