April 18 is quickly approaching. Yes, that's right, I said April 18, not April 15. The 15th falls on a Saturday, and Washington DC Emancipation Day holiday, which is the 16th will be observed the following Monday on the 17th, which makes the tax due date for this year the 18th. Deadlines aside, once you've finished filing your taxes, depending on your W-4 allowances taken and tax withheld throughout the year, or depending on the number of deductions and credits you claim, you may be entitled to receive a tax refund.
While it's tempting to splurge on wish list items, take a step back and remember that this was your money all along. If you had the money throughout the year, how would you have spent the money otherwise? Below are 3 things NOT to do and 7 smart things to do with your tax refund.
3 Things Not to Do With Your Tax Refund
- Put it in your checking account as "cushion" and do nothing
- Go on a shopping spree
- Spend it on upgrading items that are working perfectly (ex: TV, smartphone, etc.)
7 Smart Things To Do With Your Tax Refund
- Start saving (or continue saving) towards your emergency fund
- Start (or continue contributing to) a Roth IRA. *income limits may apply
- Pay off high interest credit card debt
- Invest in yourself - take a class that improves your skill set / makes you more marketable
- Use it for home improvement projects that will increase the value of your home
- Start (or contribute more) to a 529 plan for your kid's college savings
- Spend it on a necessity that you've been putting off (ex: car tires, mechanical work, etc.)
Whether your refund is a large windfall or a couple hundred dollars, be smart and use that money to put you on a stronger financial path.
What will you do with your tax refund?