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Unfortunately for everyone, taxes are an unavoidable facet of life. Although they pay for many services that are vital to the community and the country, the truth is that nobody really enjoys paying their taxes. However, the pill can be a little easier to swallow if you receive a tax return. Occasionally the IRS carries out rebates on individuals and finds that they have been charged too much tax, which they then return to them (the average tax return in 2010 was around $3,000).
Although there are plenty of great things you can do with the money, there are also ways of spending it that you want to avoid to ensure you don’t simply waste it.
● Creating debt – Just because you have suddenly come into some money, doesn’t mean you have to spend it right away. Think carefully before putting down the first payment on that car; consider whether you are really able to afford it in the long term.
● Frittering it away – If you simply put the money in your bank account and forget about it, the chances are that you will merely spend it on little things everyday and have nothing to show for it at the end.
● Loaning the money to someone – Unless you have a contract ensuring that the receiver of your refund will pay you back, with interest, you will probably not see your money again, certainly not for a very long time.
You should carry out the following five tips with your tax refund to ensure you benefit fully from your recent windfall.
● Keep it separate – Putting your tax return in your regular bank account is a surefire way to spend it quicker than you would like. It is a great idea to allocate your tax refund on a REACH card which will keep it removed from the rest of your finances earning interest.
● Pay some of your mortgage – The sooner you are able to pay off your mortgage, the more money you will save in the long term as you will not be accruing interest on a large sum. A tax refund can take a nice slice out of your mortgage repayments.
● Go to school – It is always a good idea to get more knowledge about a certain topic, whether you are looking to progress your career or simply learn for fun. Although school can be expensive, using a tax return to pay for fees is a great idea.
● Start a business – Always wanted to work for yourself but haven’t had the necessary capital to start your own firm? Getting a tax refund could give you the fiscal shot in the arm you need to get your business off the ground.
● Donate it – If you are feeling particularly altruistic, you can always give your tax return away to people you think may need it more.
As you can see, there are some great ways your tax return can make a difference in your life, as well as a few ways you can squander it. What will you do with your tax return?
