Tax Refund Time
If you’re going to get a refund, it’s possible you’re having too much deducted from your paycheck. You might want to consider going back and looking at those deductions and talking to your Human Resources department to see if you want to adjust that.
But a lot of people like having that lump sum at the end of the year, because it’s like forced savings. If you like that, that’s fine. It is your money. It’s like surprise money, sort of like when I do the wash and find some quarters at the bottom of the washing machine.
What are you going to do with that extra money? I’m saying please don’t all of it. Yes, you can treat yourself a little bit, but let’s look at some other options. What can you do with that extra, nice lump sum that comes in?
Consider paying down some of those credit cards. That’s a great use of that money. Get rid of those high interest charges.
You may also want to pay down other debt. You can make an extra payment on your car or on your house.
This is also a great time to start an emergency savings account if you don’t already have one.
And, how about this: save for a summer vacation. That’s going to be here before we know it.
You can also think about saving for a child’s education.
And, finally, think about adding it to your retirement. You can start an IRA now that will count on next year’s taxes.
Those are good options to do with that new money that comes in.
If you have to spend part of it, I suggest you go halves. Spend half of it on something fun, and invest or save half of it. That half can go a long way! Don’t get to summer and have nothing to show for this nice lump sum. This is sort of like lagniappe. Treat it as such, but don’t be foolish with it.