If you are anything like me, the arrival of your income tax return is the only thing that brightens the gloom around tax season. When the highly anticipated check arrives, I usually feel as though Grandma IRS has sent me a belated birthday check with a little note that says "treat yourself" scrawled on the back. Every year I use this check like its free money, a little something that makes it possible to freshen up my closet. But my tax refund is not free money; it's my own hard earned cash and this year I want to spend it wisely. Here are four smart and simple tips to make the most of your income tax return:
Create a Nest Egg. Not to sound like the harbinger of gloom, but we live in uncertain economic times and its smart to set aside some "just in case" funds. Lynnette Khalfani-Cox, author of Zero Debt: The Ultimate Guide to Financial Freedom, suggests that you set aside enough money for at least three months of bills. Your income tax return is a good starting place; each month, slowly build your nest egg from there.
Tackle Debt. Paying off student loans or credit card debt can feel like an eternal battle, with no victory in sight.But according to Dave Ramsey, author of The Total Money Makeover: A Proven Plan for Financial Fitness and syndicated radio host, paying off your smallest debts first helps you build momentum and quickly see results in debt reduction. Ramsey suggests you make a list beginning with your smallest payoffs first and tackle each debt one at a time, this is called the Debt Snowball Plan. Putting your income tax return towards one of your smaller debts will be a victory and a step forward.
Invest in Your Goals. Everyone has a list of things they would do if they had a little extra cash and now you have it! Invest in a gym membership, classes in a foreign language, professional training, or that trip that you have always wanted to take.
Have Fun. Handling your money wisely means spending it on your priorities, and hopefully your priorities include a little fun. Set aside about 10% of your income tax return to go on a vacation with your family, have a special night out with your daughter, sister, or niece, and go ahead, buy that gorgeous pair of shoes that you can wear with everything!
Think of your income tax return as a fresh start at saving and budgeting. But if you don't consider yourself a personal finance guru, don't write yourself off yet ! When your income tax return comes in this year, grab a girlfriend who drools over excel sheets or sign up for a simple and free budget management account with Mint. Many happy returns!
(Photo via TaxCredits.net)
Monica Gabriel is the Web Editor of
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