Does your tax return feel like winning the lottery or like reclaiming your car from the repair shop? It’s easy to think of a tax refund like free money, but it’s really your own hard earned cash coming back to you. Since you put in so many hours to earn it, why not maximize its value by putting it to work for your goals?
In 2014, 69% of those polled by American Consumer Credit Counseling indicated that they had used their tax refund to pay down debt and get ahead on monthly expenses like rent, utilities, and car payments. The year before, only 26% said they would put their refund into savings, while 45% said they would use it to pay down credit card debt. The National Retail Federation reports that 46% of its 2014 survey respondents intended to cushion their emergency savings with their returns, with nearly six in 10 young adults between 18 and 24 putting their refunds into savings.
What do all these statistics show us? There is a growing trend of money-smart Americans opting out of tax-time splurging and focusing on getting ahead. Here are a few easy ways to get yourself set up for success as tax season approaches:
- Take advantage of a Volunteer Income Tax Assistance (VITA) program. VITA programs offer free tax help to those who generally make $53,000 or less, persons with disabilities, the elderly, and limited English speakers. Qualified individuals can receive basic income tax return preparation assistance from IRS-certified volunteers.
- Use Form 8888 to split your refund. Why rack up more debt on your credit card in an emergency when you can set aside savings to cover it interest-free? The IRS provides taxpayers with multiple avenues to receive and save their refunds. Take advantage of direct deposit to your checking account to pay off debts and automatically deposit a portion of your refund to your savings account.
- Need more inspiration to save? Enter to win with SaveYourRefund. SaveYourRefund has 101 cash prizes, including 100 weekly prizes of $100 and one grand prize of $25,000.
- Take the Ohio Saves pledge to make a commitment to yourself to save. Get emails to keep yourself motivated and/or sign up for text message reminders to get tips and advice about your savings goals.
Making smart financial decisions isn’t always easy. Whether you have a plan mapped out for your tax return or you’re just getting started, think about how to make that hard earned money work hard for you. Spend some, save some. It really is that easy.
