It’s hard not to look forward to getting the lump sum of a tax refund. You lived all year without it so a splurge seems like a good way to spend it. Reward yourself, right?

Well, actually, you didn’t save it on purpose so it’s not really a reward. It’s just getting your own money back that the government withheld. So, you may want to consider some sort of spending compromise. Splurges are fun but smart splurges are better.

My number one recommendation is to MAKE A PLAN NOW. Don’t wait for the money to arrive and use it willy-nilly. You’ll regret having lost it but by bit when you have to buy new tires or wish you could say yes to the weekend get-a-way.

Here are a couple ideas:

The 3-Way Split – I need, I want, I’ll save.

Split the money and replace something you’ve been needing. Sometimes we neglect what we need to replace because it’s not fun money to spend. Work shoes, a few bath towels, the weed eater, etc. It’s not exciting stuff but you’ll be grateful when you get out of the shower to a towel that you can’t see through.

Take a portion of the money for something you want. Concert tickets, a massage, hunting gear, kids summer. No need to list out what we want because we all know it’s easy to find a way to spend the “want” money, especially with kids around.

Last, take a part of the tax refund and put it away. Emergency savings, vacation fund, school clothes or Christmas. During a few financial counseling sessions I’ve met with couples who couldn’t agree to put away money when they have savings portion could be split between high-interest debt and savings or put some towards the debt and spend a little on emergency essentials. Having food or other supplies stocked up is a sort of savings the bank isn’t involved in.

Even Split – Pay them, pay me.

Credit cards, store credit, lines of credit. Make them disappear. These types of debt have the highest rates of interest. Take half of your return and put a dent in what you owe. This is probably one of the best things to do with your return but there’s some fine print. If you pay them off and rack up a balance again you’re not doing yourself any favors. Pay them down and make a plan about how to avoid using them in the future. Then commit to the plan. Make sure to communicate and agree on a plan with your spouse.

After you pay down your high interest debt the best way to avoid building it up again is using the other part of your return and jump start a revolving savings. Read more about revolving savings here but basically it’s a way to prepare yourself for expected but irregular expenses, the things we usually end up using credit lines to pay for. Be ready for car registration, school clothes and supplies, holiday expenses, oil changes, and more!

Maybe you’re on track with savings and have already avoided using debt. In that case, enjoy your tax refund! Enjoy seeing your savings grow, pay an extra house payment, or get a new TV. Reward yourself for already doing what you should with your money!

Get more ideas from the links below.

Tax Time Tips and Tricks by Andrea Winkler

Responsible tips from Money Crashers

Fun tips from Intuit

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