While many of us are maxed out preparing for Christmas, it’s not too early to start considering tax time – especially tax refund time! For many families, tax refunds are a planned way to either pay down holiday debt or to provide a late “Christmas” if December was tight. It’s smart to take a moment and consider the best ways to use your tax refund.
Should you pay down debt? Save for a rainy day? Splurge it all? Save for a goal? Tax time leaves lots of choices. Here are four ways to get the most value from your tax refund this year:
- Pay down your debt. Do you have a pile of debt? Consider using your refund to make a dent in your debt. Alternatively, you can pay down principal on loans for cars or your home.
- Save for a rainy day. Make your tax refund work for you by putting it into a savings account, earning interest, and having it ready when you really need it! Interest rates may not be high right now, but having money to cover an emergency like medical expenses, car repairs, or unexpected bills has big payoffs.
- Consider your financial goals. What are you saving for? No matter what your goals are, you can get there faster using your tax refund. Take time to decide and write your goals down. Include the amount you want to save and the date you will have the money. Writing goals makes a big difference in achieving them.
- Save your refund for a chance to win $25,000. Did you know that saving even a little of your refund this year will give you a chance to win big? It’s very easy to split your refund between accounts, like a checking and saving account, by using IRS Form 8888. No account? You can also save by ordering a U.S. Savings Bond for yourself or someone else. Then enter to win rewards at www.saveyourrefund.com.
It can be a big challenge to plan your entire refund away. If you’ve been looking forward to new purchases all year, try taking the middle ground: spend some and save some. If you are using some of your refund strategically and stick to the amount you decided to spend, you’re still ahead! You’ve worked hard all year long, and you deserve to enjoy financial security and to reach your savings goals. Making a strategic plan now will help your family all year.
Need help finding ways to save? Take the Ohio Saves pledge at www.ohiosaves.org. You can make a commitment to yourself to save and receive emails and/or text messages to keep you motivated.
Written by: Betsy DeMatteo, Family & Consumer Science Educator, Ohio State University Extension
Reviewed by: Pat Holmes, CFCS, Family & Consumer Science Educator, Montgomery County Extension, Ohio State University
Source: Consumer Federation of America, via America Saves, at www.AmericaSaves.org
