There’s living life to the fullest and then there’s this: spending your tax refund on shoes, a purse, a TV or anything else that will depreciate while you’re still in the struggle zone.
Most Americans – 83% according to the IRS – are expected to receive a refund this year. The average refund is about $3,000, and it’s apparently enough to buy something one cannot afford.
The memes plastered all over social media explain it all. Before refund day, you took the bus, after the refund you financed not just a car but a Benz, with chrome and whatnot. Then there is the after-after refund, the one where the repo truck hauls your dream of living fabulously on four wheels away.
The end.
Fortunately, your financial finale doesn’t have to begin here. Before you show off your overspending skills, think about a few long-term ideas that will make your tax refund (and taxes for that matter) worthwhile.
Save for a rainy day
You can stand the rain, with a few thousand dollars sitting quietly in a bank account. If you’re a homeowner, savings can literally save you from costly repairs that are most likely necessary. Replacing a hot water heater alone can cause a major setback, so consider saving your money and use your tax refund for the unexpected costs of owning a home.
Don’t buy a new car
Unless a new ride has already been placed in your monthly budget, refund time is not the time to finance a vehicle. Sure, you will find a sale catered to shoppers. In fact, some dealers will “work with you” by accepting your W-2, a statement that shows how much money has been earned in the prior year. Using your refund to finance a vehicle can force you into a contract for up to five years, an agreement that the future paychecks cannot cash. Consider paying cash if you need to purchase something on four wheels.
Take a vacation
Are you surprised to read “take a vacation”? You shouldn’t be. The reason most people give for not getting away is usually financially-based. Why not create memories and reduce stress (experts agree taking a vacation is good for your health!) by using your refund to head out of town? Unlike a monthly car note, a vacation only needs to pay for once, and that’s it!
Getting excited about a tax refund is nothing new, but if you’re solely relying on that IRS check, it’s time to reevaluate your income. How? Think about going back to school to qualify for higher-paying work. Get a second job or create a side hustle. Find a way to create more money every month, not just once a year.
Did you blow your tax refund? Or have you created a plan to make that money work for you? (After all, you’ve earned it!) Let us know in the comments.
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