You have a refund this year! Wooo Hooo. Extra money to work with. You may be feeling excited and wanting to spend this money on something, but what? Below are some ideas to consider:
Disclosure: I am not compensated by any of the websites I recommend and all information is for educational purposes.
1. Invest your refund
This is a great opportunity to create an emergency fund, add to your retirement, or kid’s college fund. If you are new to investing, review Investing for Beginners. If not, maybe you’d be interested in aligning your values with your investment. Domini, “a mutual fund firm that’s women-led” is one option. Another option is Calvert a company with a “range of Responsible Investing solutions.”
2. Pay down your credit cards
If you are burdened with credit card debt or looking to reduce your monthly payment, this is an excellent way to use your refund. This will increase your FICO score and improve your credit. You could also negotiate with your credit card company and pay off a credit card or reduce your balance; hence, reducing your monthly payment. Negotiating with the financial institution may initially affect your credit score.
3. Pay down your mortgage
Imagine lowering your monthly payment or the life of your mortgage. It’s doable if you chipped away every year you received a refund. Per The Mortgage Reports, here are some ways to do so:
- Make an extra payment
- Recast – make a lump sum payment towards your principal but keep the same mortgage
- Make a lump sum payment towards the principal
4. Self-care
Take care of yourself. This could include a one, three, or seven day meditation retreat, a yoga retreat, or simply taking a much needed vacation. You can also expand your home self-care routine, like finally purchasing a proper meditation mat and cushion.
5. Invest in yourself
Maybe you need financial guidance to help you navigate challenging situations. Financial Mentoring can assist you in achieving your goals and building a healthier relationship with your finances by helping you understand your financial self clearly and empowering you with tools on how to deal with triggers.
Adjust your withholding
Yes, this doesn’t sound that exciting, especially if you are receiving a refund for the first time. But one thing to take into account is that Uncle Sam has had your refund in their bank account all year long. Think of the interest you could have earned or not paid if you had this money in your account. Review your withholding by using the IRS Tax Withholding Estimator or take advantage of pay as you go service from the IRS. This will ensure you benefit and use your money to the fullest potential instead of Uncle Sam.
Mindful Reminder
Be wise with your refund. Going out and splurging on things is a lot of fun, but in the end, all you have are “things.” Learning to be patient and skillfully planning what to do with your refund will yield a more gratifying experience, as you will reap the benefits of less debt and a calmer mindset. How does that sound?
Related Posts
Berry, C. (2021). Five ways to pay off your mortgage early. Retrieved from: https://themortgagereports.com/67375/5-ways-to-pay-off-your-mortgage-faster#5-ways
IRS. (2024). Pay as you go, so you won’t owe: a guide to withholding, estimated taxes, and ways to avoid the estimated tax penalty. Retrieved from: https://www.irs.gov/payments/pay-as-you-go-so-you-wont-owe-a-guide-to-withholding-estimated-taxes-and-ways-to-avoid-the-estimated-tax-penalty
IRS. (2024). Tax withholding estimator. Retrieved from: https://www.irs.gov/individuals/tax-withholding-estimator