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What to Do With Your Tax Refund

We’re in the midst of tax season once again, and with that comes the stress of filing your taxes correctly and on time. If the thought of starting your taxes is a bit too much for you, read this article from the IRS about how to make filing your taxes less stressful. You may find yourself using an accountant to help you with your taxes, or doing them online yourself with a site like TurboTax. Once you’re done filing taxes, you can take a deep breath. But you’re not quite done with the stressful decisions just yet. If you’re getting a tax refund, how do you make sure you’re spending it in the right way?

When you find out how much of a refund you’re getting, the extra couple thousand dollars can seem thrilling, and you might think of your refund as extra money. It’s important to remember that your tax refund is not a bonus, so you don’t want to blow your entire refund on a new TV or another impulse purchase. It’s crucial that you don’t spend the money you’re expecting to get in your refund before you receive it, and you want to think hard before spending your refund on just anything.

Make a Plan

Sit down and make a plan for how you’re going to spend your tax refund. Make a budget based on how big of a refund you’re getting, and split it up to spend the money as wisely as you possibly can. You could put the money into your savings, or start emergency savings account with the money you receive. Another smart way to spend your refund is to pay off debt whether it may be making an extra mortgage payment, or paying off high-interest debt like your credit card debt, your student loans, or your auto loans. If you still have a big chunk of debt to pay off, you could consider refinancing your student loan debt or consolidating your credit card debt to save money in the long run and alleviate your debt even further.

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Consider a Splurge

Using your refund to save money or pay off debt seems like an obvious smart choice, but it’s not necessarily bad to use a small chunk of it to treat yourself as well. Depending how much money you get back in your refund, set aside something for yourself. You could put some of the money toward a vacation that will help you relax, or go for a night out with your spouse or your friends.

Seek Advice

If you’re lost on how you should spend your tax refund, don’t be afraid to ask the advice of a financial planner. If you don’t know as much as you’d like to when it comes to finances, having an expert to steer you in the right direction can be extremely helpful so you know you’re spending and saving correctly. Everyone’s circumstances are different, so looking at your personal finances with an advisor will aid you in making a decision that’s best for you. Take the time and consideration to spend your refund in the right way.

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