A tax refund is always a welcome bonus. Whether it is $300 or $3,000, the way you use that money can have a real impact on your personal and financial well-being.
Before you spend your refund, try to think through all the options — even ones that are not especially glamorous.
Follow these general rules:
Plan ahead before spending your refund. Without a plan, you may use the money on the first important thing that comes to mind and then later realize something else was more important.
Devote a portion of your tax refund to build long-term financial security. Pay off a debt or set up a long-term savings account.
Don’t throw away part of your refund on preparation fees and/or loan fees. Often those “quick refunds” are just giving you a high-cost loan. Look for free tax preparation programs like the VITA program sponsored by the United Way of Denton. Trained volunteers can assist in preparing your return and file it electronically for free.
Pay off bills. This should be a priority.
Save for needs for the coming year. For example, set up an emergency fund to get you through small emergencies. Or set aside the refund to pay for occasional expenses such as car insurance.
Or maybe you need to make a special purchase such as a refrigerator or a sofa. But think ahead — are you fulfilling a want or a need?
Then, after saving part of the refund, paying off a debt, planning for needs for the coming year, use part of your refund to make your day-to-day life better. Among all the items on your “wish list,” choose the most important and shop wisely for it.
MAGGIE JOVER is the family and consumer sciences county extension agent with Texas AgriLife Extension. She can be reached at 940-349-2882.