Spending Tax Funds Wisely

Tax refund time is near, and it’s tempting to spend that refund almost as soon as it arrives. After all, surviving the stress of tax season is no easy task. But while a little indulgence might be fine, most of us could benefit from considering a more tactical way to make the most of that money.

Before you spend, first take a hard look at your budget. If you don’t have a personal budget, now would be a good time to create one. If finances are tight, having that financial cushion in hand may make it a little easier to take a close look at what you earn and what you have to spend each month. Once you’ve evaluated your budget, you may find that some of the suggestions below may be the best way to constructively utilize that return.

Pay off credit card debt.
Most Americans have some amount of credit card debt. If you’re one of the many who must deal with high-interest payments each month, use that tax return to make a substantial payment. This may not be the most exciting use of a return, but paying off a credit card debt will leave you with more money in your pocket in the long run.

Pay off a delayed interest purchase.
If you’ve ever given to the allure of buying an item with the promise of no interest or no payments for a number of months, then you know that the interest you eventually will incur, after that introductory period ends, is typically very high. Using your tax return to pay off one of these purchases, or to make a significant payment towards one of these purchases, will definitely pay off.

Open a savings account.
Everyone needs an emergency fund. By having a cash cushion, you are ensuring that any unexpected expenses or emergency bills don’t damage your carefully planned monthly budget.

Invest in a 401(k).
If you don’t have a retirement plan, or just haven’t contributed to it generously for a while, now is a great time. An investment in a 401(k) is an investment in your future comfort. 401(k) plans are not taxed, they reduce your gross income, and many employers will match a certain percentage of your contributions.

Invest in a future goal.
The money you’ve just received from Uncle Sam may not look like college tuition for your youngest child, but it can be if you invest it properly. Stocks, bonds, index and mutual fund investments aren’t just for big-time stock brokers. By contacting any local investment firm, or researching the possibilities on your own, you can invest that return so that it will accrue interest and grow.

The potential for your tax return is just the beginning. Once you’ve laid the foundation of good money management, you’ll be surprised how quickly your lifestyle will improve. To find out more about smart budgeting, during and beyond tax time, visit Check ‘n Go’s Planning Section.

Christy Belden works in interactive marketing for Leapfrog Interactive. Visit Leapfrog Interactive for more information.