Well, it is that time of year when we gather our W-2s, tax receipts, and scraps of paper we kept in a shoe box all year long to file our taxes. If you are one of the lucky ones you may even get some money back from the government (not that is good either, since you overpaid the government in the first place, but that is another story). So what should you do? It is no wonder that tax season happens to fall near the Super Bowl and all the great commercials eliciting visions of flat screens and new cars are dancing in your heads. But is that the wisest thing to do?
I would like to talk about three things you should consider as the best way to use that money you get back from your Uncle Sam.
Spend Wisely – Don’t have buyer’s remorse. Plan on your purchases beforehand to avoid impulse buying. You can spend the cash, just make sure it is for something that you will get a return on. Does the car need some work? This preventative spending could save you from a huge credit hit if something goes wrong during the year. Maybe a big stock up trip to the wholesale club for items that you know you will use. This could save you a trip or two later and some cash from the discounts of buying in bulk. And I know how a new flat screen would look, but you have a perfectly good television. Will those extra inches really make flipping channels looking for something to watch on TV that much more enjoyable? These are just a couple of ideas to get you thinking, but besides spending, you have other choices too!
Save – Yeah I know the title is about how to spend, but an even better use of your money would be to save it. Don’t just go and put the money in a mayonnaise jar or even for that matter the local bank. Do some research and find an online bank like HSBC or ING that offers a higher interest rate than you can get down the street. A variation to savings would be to pay down debt. Nothing relieves more stress and worries by eliminating debt. A flush of money could go a long way in reducing some of those credit card bills, maybe even eliminating one or two altogether. So you could say you are “spending” the money on yourself by reducing debit or you’re creating savings.
The last thing to consider for your income tax return is to Invest. The market, despite the overall malaise of the economy, is recovering. Take a look at more global investments that don’t rely too heavily on the US economy. Real estate, is at an all time low, you can lock in a great rate on a 30 year loan. This is a long term investment that is sure to rise over the course of the note. Also don’t forget about investing a nice lump-sum deposit into a retirement plan that could help boost it in the long run too.
So if you have money coming back, look at where your money could do the most work for you. Do not get too excited when that million dollar ad flashes that bright and shiny object in life size grandeur on the flat screen. Smile cause you know where your money is going and pass the bean dip.
Photo Credit: Jinx!