5 Smart Ways to Spend Your Tax Refund

5 Smart Ways to Spend Your Tax Refund

                   If you are getting a tax refund check this Spring, you may be tempted to follow that popular meme that says “Life is short. Take the trip. Buy the Shoes. Eat the Cake.” as you contemplate what to do with your money.  In a way, that meme is just one more example of the plethora of messages you receive every day which encourage you to spend money instead of saving it.  As a Financial Advisor, I feel obligated to suggest other ways to use that refund – decisions you make now which could, quite possibly, help improve your overall financial situation in the future. 

The following five suggestions require you to subjugate short-term desires for long-term goals, which is especially hard to do when your long-term goals are unclear.  But, with life expectancies improving dramatically over the past century, you may live longer than you think.  Shoe trends can be notoriously fickle.  And, unless it’s angel food cake, that slice of cake can be loaded with calories. 

Instead, consider using your windfall for the following:

  1. Get a head start on your taxes for next year. Apply your refund toward your quarterly estimated tax payments, or make a contribution to your IRA for the next tax year. You’ll appreciate having this handled when you file your taxes next Spring.
  2. Pay down balances owed. Whether it’s credit card charges or mortgage principal, put your refund toward debt reduction, to avoid unwelcome interest charges that can prevent you from getting ahead.
  3. Put money aside for emergencies. Setting aside the equivalent of two weeks’ pay can help you pay for minor expenses that come up, such as car repair, without having to go into debt.  Saving larger amounts could offset a job loss or healthcare emergency.  Use an online emergency fund calculator to figure out how much you’ll need for unexpected occurrences.
  4. Start or contribute to a college fund for your child(ren.) The sooner you set aside dollars for tuition, books and other higher education expenses, the more that compounding interest will earn for your student over time. 
  5.  Fund a Health Savings Account (HSA).  Take advantage of the tax deferral savings that a Health Savings Account can bring, if you have the option of funding one through your work. 


Not sure which option is best for you? 

Call us to help determine your priorities with our budget and data-gathering tools, create a financial plan, or set up an HSA or other tax-deferred account.  Call Corinne Luper at our office, 971-340-4832, to set a no-obligation appointment today.