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What should we do with our tax refund? This is such a great question to ask! There are many ways to use your tax refund to help you get ahead financially.
Problem
We are getting about $4000 with my tax refund? What should we do? Bart wants to use it for home improvements. But Sally, is a part time teacher and won’t be getting any pay checks in the summer… We really need $6000 to cover for what she won’t be making. Also, we are also close to paying off the last of our debt. And we have been wanting to start an “Emergency Fund” Savings, but we have a hard time keeping money into savings. What should we do?
Do we split it? Save it?
What GREAT questions! Finances can be tricky. There are so many different things everyone knows they need to use it for, but don’t know which one is most important, or should be first.
Solution
There are so many smart ways to spend your refund! Everyone one and their situation is different.
I PERSONALLY recommend paying off debt first (Any Debt BUT mortgage).
The reason to use your tax refund to pay off debt: You pay $600 a month towards debt each month. If you only have $4000 left of debt to pay off, use your refund! Then.. keep to the same budget paying $600 towards your “debt”… ONLY since you aren’t putting $600 towards debt each month, you can swap it into $600 towards savings!
10 SMART ways to use your tax refund
They are not in any specific order…. Choose what is best for your financial situation.
- Make an extra mortgage payment.
- Pay off debt: credit card, car loan, student loan, ect. Start with the largest amount first, then use Dave Ramseys Snowball Effect for the rest.
- Put it into an emergency savings fund.
- Place it in savings towards a down payment for home or car
- Plan a fun family vacation.
- Make an extra car payment.
- Tuck it away into savings for a car/medical/school/work/fun emergency.
- Do some long wanted home improvements.
- Pay off medical bills.
- Put a chunk of it into retirement.
In conclusion
Your financial situation is different than mine or Barts and Sallys. It’s important for you to realize you need to work towards what will improve your financial situation the BEST.
This past year, since we were expecting baby #3, we put a huge chunk of it into “Medical Savings” for our summer baby. Then, part of it went towards home improvement… so we could move our oldest into the basement to sleep. And the last of it went to some pleasure, and a new washer and dryer!
In the example above… Sally and Bart decided to use some of it to pay off their remaining debt, and then for some home improvements that are NEEDED… not just wanted. By paying off their remaining debt, they have $700 a month EXTRA which should cover summer when Sally isn’t working.
I LOVE how everything works out!
Be smart with your refund, and it can save you SO MUCH WORRY later on!
What do you use your tax refund for? Comment below to give us more ideas.
Further Reading
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