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Frugalistas Frugalistas

Tax returns and frugality

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It’s tax season. Your response to that phrase is either going to be “GASP” or “WOO HOO!”
So…Getting $50 back from Uncle Sam? $500? $5000?

This can be a dicey proposition for some of us: a little extra money can easily go toward something frivolous, or something you don’t need. That can be okay sometimes – but if you’re getting a large amount (or even a small one), sometimes you’re going to get a lot more value out of thinking long-term. And frugally.

Without further adieu, here are some ideas for how to spend your tax refund.

Whether small or big or huge, some wise thinking now can pay off big later. Here goes:

If you’re getting $50 back…
Don’t spend it all in one place.

Actually, $50 is a good amount to use to open up an account at your local credit union. Why? Credit Unions are great places to have membership – you’re not a number, you’re a “member,” and, with the focus on the “1%” and everyone in banking making zillions of dollars, note that all credit unions are not-for-profits. And insured as well. Learn more at this website: A Smarter Choice.

If you’re getting $250 back…
Is it time to start investing? $250 might be a good number to start an account with something like Sharebuilder – where trades are $4 each.

OR, if you already have mutual funds, see if you can invest some more – look for a “no-load” fund.

Funny enough, your insurance company might have mutual funds, too. (Frugal Freida just found out State Farm has mutual funds. Who knew???)

If you’re getting $500 back…
How about paying down a nasty credit card?

By nasty, we mean the one with the highest interest rate. BUT, some experts will recommend that, instead, you start paying down the one that is closest to zero. The mental effect of having a credit card with a zero balance can be a real plus for your psyche.

If you’re getting $1000 back…
Have you started your holiday shopping yet? Even if you’re not picking up stuff for Christmas now, think about those things like birthdays and anniversaries – and consider taking care of the ones you can take care of now.

OR, but things off-season…For instance, if you live somewhere cold and snowy, since it’s now April, see if you can find some discounted snowblowers or stock up on winter coats from the sale rack.

If you’re getting $5000 back…
Consider maxing out on your retirement plans – if you have an IRA, use that 5 grand windfall to add to it. Or, if you don’t have one, check with your tax professional and find out if it makes sense to open one.

Or, start a 529 plan for your kids – that’s a tax-free way to save for their college education.

Is this the definitive guide for what to do with your tax refund? No…

But we hope you can at least start thinking about how to spend that extra money.

http://newfrugality.com/how-to-spend-your-tax-refund/
Posted on the NEW CafeMom Mobile
by on Feb. 15, 2013 at 9:15 PM
Replies (31-32):
kitchenwitch27
by on Feb. 18, 2013 at 8:23 PM
I am paying of credit card debt as well.
Posted on the NEW CafeMom Mobile
LilByrd
by on Feb. 18, 2013 at 11:58 PM

We are going to get the kids new outfis for summer (my oldest has out growen her stuff and my 3 month old is wearing my oldest hand me downs). we also need to add a room to our house since we have a 2nd child. Yes we wanted a 2nd one just did not think it was going to be so soon.Also pay some cards off and get rid of them for good. 

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