Spending spree or save: What to do with your federal tax refund

Federal tax refundHave you already received your federal tax refund? Is it a dinner at the local fast food type of pocket change or a spending spree at the mall kind of lump sum? Whatever the amount, here are a few ideas, from responsible to fun, on what you could do with the deposit.

Make an adjustment

First, I want to ask you this. Do you like giving the government an interest free loan? Getting a big fat refund check is nice but you had to wait a year to get the money. Where did that money come from? It came from the taxes taken out of your paychecks. You could have been getting that money all along if you didn’t have so much taken out of each paycheck.

If you want to, you can change the withholding amounts by completing a new W-4 withholding form where you work. It will take a couple of weeks or so to go into effect and then you’ll get a little more money in each paycheck.

Pay your bills

It’s not glamorous but if you can pay down or pay off your bills, you’ll feel a lot better. Start with the high interest credit cards. Those things are costing you money by adding outrageous interest charges. The sooner you get them paid off, the more money you’ll have in your pocket every month. Here are a few more practical ideas from the Frugal Dad on how to spend the cash.

Pay your loans

If you’ve ever borrowed money from a friend or relative and didn’t pay it back, then for the sake of the relationship, consider paying something now. Nothing kills a friendship sooner than a loan. Relationships are more important than money and if someone you know was nice enough to come through for you in a time of need, here is your chance to prove that you deserved their trust. Even if you can’t pay it all, a partial payment may go a long way in repairing the relationship.

Be an angel

No matter how bad you think you have it in life, someone else is worse off than you. When you get a little extra, as you have now, consider donating some or all of it to a good cause such as a charitable group that does work you admire, your local religious establishment or the local food bank. They say that what goes around comes around. Why not launch a karma boomerang?

Rainy day fund

It’s a good idea to have a little something put away for a rainy day. Heaven knows that lately it’s been pouring. Now is your chance to finally start that savings account that you know you should be building. Quick, before you have a chance to spend all of your refund, open up an account and put some of your refund in there and then, as Tony Soprano would say, “Forget about it.” Really, forget that it’s there and let it grow. The compound interest that it earns will grow over time to a nice tidy sum. Just imagine what you could achieve if you were to take every refund that you get from now on and add it to your fund.

Whatever

Saving money is like going on a diet. If you don’t allow yourself a little fun, then sooner or later you’ll go on a binge. So, I suggest that you allow yourself a little fun money to just go and blow on the silliest thing you ever wanted (that’s legal). Live it up and have some fun with part of your check. If you’re flexible on what you can do with the money, then consider the ideas in this article, “10 Dumb Things to Do With Your Tax Refund,” by Stacy Johnson.

When do I get my tax refund?

Haven’t received your check in the mail or via electronic deposit yet? Most tax filers get their refunds within 21 days of filing. If it’s been longer than that and still nothing, then you can check with the IRS service called “Where’s My Refund.” Many factors can affect the process speed and even if the IRS service gives you a certain date, that date can change if circumstances change. Don’t try to call the IRS by phone to verify the status. It won’t really get you anywhere. The telephone assisters can’t tell you any more than you can find at the site.

Well, there you have it. A few ideas on how you can spend your tax refund. As mother used to say, “Don’t spend it all in one place.” So, what are you going to do with the money?

 

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