10 Great Things to do with Your Tax Refund

Now that tax season is over it’s time to think about what to do with your tax return money. Below are 10 great options.

1. Start an emergency fund or add to yours. With the economy in the state that it is, it is VERY important to have an emergency fund. It is great to have 6 months worth of living expenses, but even better to have a year’s worth. Put the money in a high-yield savings account and DON’T TOUCH IT! That way it’s there if you need the money. My husband and I are working on this as we speak. He’s in the military, but he receives jobs as they are available (he’s in the National Guard). So, there may be 2 weeks here and there that he doesn’t work. We should have $15,000 in our account by the end of May, but it’s definitely nowhere near a year’s worth of emergency.

2. Invest in a Roth IRA. Ever since I quit work over 2 years ago, I haven’t been the best about maxing out my Roth IRA every year. Since I have no other retirement right now, this is very important. It’s very important whether you have a job or not. This is a great option and you definitely need to plan for your future.

3. Pay off your debt. Start with the lowest amount of debt you have and work your way up. For instance, if you have $2,000 in credit card debt (which I hope you don’t), pay it off before you put money on a $10,000 car payment.

4. Put it in a 529 for your children. My advice is to save for your retirement before you save for your child(ren)’s education. Dave Ramsey says to make sure your retirement is set into place. It is always great to set some aside for their education though as I heard this morning it is going to cost $200,000 in 18 years for college! Woah!

5. Work on your house and fix it up. Home improvement will usually make a good return on your investment. If done properly (kitchens and bathrooms are major), then you will see the profit when it’s time to sell. We are going to finish our basement when my husband returns from Afghanistan and add around 1,000 sq. ft. to our house, so that will definitely help.

6. Add to the principal on your mortgage or refinance your home. This is technically working on paying off your debt, but I feel it deserves a separate category. It is amazing how much you can cut time off your mortgage just by adding extra payments or money to your principal. We refinanced, which I spoke about here, and I calculated how much time would be cut from our mortgage just by making 1 extra payment per year (pay 1/2 your mortgage payment every 2 weeks) and we are paying our original mortgage payment instead of the new refinanced payment (which is $200 less every month). We are cutting our mortgage from 30 years down to 18 years!!! Wow!

7. Invest in stocks. If you are unfamiliar with stock options (which can be confusing), try joining an investment group. You can gain your capital with some knowledge on stocks. This is something my husband and I haven’t done except for the stocks my grandparents have purchased for us. It would be nice to know more though.

8. Spend a little shopping and entertainment. We understand you worked hard for this tax return. Why save every single penny of it? Take a little bit of it and put towards new clothes or shoes. It is something that is always needed. Take a date with your significant other. Keep the romance alive. Pay for a babysitter and hit the town without your children for a night. Better yet, if you have family or friends near by, see if they can watch the kids and that will save you more money.

9. Invest in energy-saving products. It is earth month and what a great way to also save money on energy. Invest your money by replacing all lightbulbs with CFL’s, seal your home, add timers to your lights, etc… This will save you money every month.

10. Open a Christmas Fund account. I hope that you do this anyways, but just in case. Save money for Christmas time so that you are not stuck buying all of your Christmas and strapped for cash at the last minute. I know it’s far away, but you will thank me later.

Have anymore ideas that I missed here? We’d love to hear them. Share with your comments. Let me know if you are doing any of these with your tax refund also!

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