Tax season is among us and for many it means a nice refund from the IRS. Each year people are perplexed on how to spend their refund – save or spend, invest or squander, new shoes or new furniture. I like to stay in the middle – spend a little, save a little.
For many young adults this may be your first refund. The first thought may be to splurge. While I’m not totally against that, below are some great ways you can maximize your refund.
Pay down debt. Even if you don’t get enough back to entirely pay off debt, at least try to make a substantial dent in it. If you have a car note pay an extra $50 or $100 towards the principle or pay off that lingering credit card bill from the holidays.
Add to savings. This is a great time to start saving for future expenses. Put some money aside for a vacation; plan for periodic, like, increased energy bills during the summer; or even a down payment on a new car.
Splurge (a little). There is absolutely nothing wrong with treating yourself to something nice. I don’t advise spending your entire refund on $600 shoes or a $1,000 purse, but it’s reasonable to treat yourself to a spa day or redecorate your bedroom. Satisfying your wants will make budgeting throughout the year more worthwhile and it’ll help stay focused.
Pre-pay rent. Many apartments allow residents to pay rent two or three months in advance. The extra money will help you get ahead and you won’t have to worry about rent for the next few months.
If you receive a tax refund this year it means the government took too much tax from your paycheck. If you don’t want a refund and would rather see more money on your paycheck, consider adjusting your withholdings. Talk to your payroll administrator for the best options.