A lot of people look forward to getting that tax refund every year. This is one example of windfall money because you never know when it will come and how much it will be. Though the IRS shared that the refunds this year has been lower by about 12.4% compared to the previous year.Though smaller, this can still be a significant amount for your budget.
Once you receive your refund, you need to be thinking about how to use that money to strengthen your finances. It is really tempting to start using that amount to buy things you want but before you do that, take a look a some of the ways you can use that money to help your finances.
Strengthen your emergency fund
As you get your tax refund, you might want to use a part of that to strengthen your emergency fund. There is no question how important your reserve funds are. This is especially true coming from the 2008 Great Recession where the housing market took a hit and affected a lot of people. This resulted in so many people losing their jobs and their homes.
Once that happens, it will be hard to get by with your daily needs while looking for a job. During these times, you will see the value of having an emergency fund. It will help you cover for basic necessities and debt payments while you look for an alternative source of income. Having the ability to do this will help you stay away from further debt.
This is because when you do not have any form of an emergency fund, you might have to go through other savings account. One usual suspect is your retirement fund. Another area you might get money from is your house through a home equity loan. If these do not work, you might be forced to take out a high-interest loan just to get by.
Pay down high-interest debt obligations
Once you get your tax refund check in the mail, it is very tempting to use that for your wants. For one thing, that is money that you did not budget for. As cush, you do not have to use it for any of the items in your budget. It is not part of your payment for the house, car, students loans, or even set aside for your utilities.
You suddenly start to think about that dress you have seen in a window display or those new smartphones that just came out. However, before you make that impulsive decision, it is a good idea to take a second look at your budget. Go over your payments especially the ones with the highest interest rate such as your credit cards.
Using your tax refund money to pay them down can help you save money. Instead of paying interest on those purchases, you pay them off so you can save money. You can use that extra fund to strengthen other areas of your finances. Not to mention that once you pay off those high-interest payments, it helps lower down your financial stress.
Upgrade your skill
No one is ever perfect that is why you consistently need to improve yourself. Having that tax refund money can give you the boost to upgrade your skills. There might be lessons or courses you can take to help you learn more about the industry you are in. There might be talks and seminars which will not only advance your learning but put you in a room full of thought leaders in your industry.
This is a great opportunity to network and gets to know people you look up to. Investing in opportunities where you can upgrade your skills will also work in favor of your marketability as a professional. For one, it might help you get ahead in the company you are working for. The more skilled you are, the bigger your chances for career advancement.
If not, you could start to be a top priority for other companies looking to hire people in your area. The skills that you possess can be a valuable asset and one that other companies are looking for. You might start to get feelers and offers from other companies in your industry. This can pave the way for a shift to a better earning job.
Learn something new
Still, in line with investing in yourself once you get your tax refund in the mail, you could also explore learning something new. You can look at your hobbies and try to identify if there are opportunities surrounding it you can learn. If you are in photography, you might want to learn post-processing images or even selling customized prints to your clients.
You can also take a look at the trend and try to get ahead with what might be in demand in the next couple of years. Technology can be one of them and even logistics. People are ordering more and more and the need to transport goods and products has been increasing. This could be a great industry to look into to help you earn more in the coming years.
One benefit of expanding your knowledge and skill set is it opens up your options when the economy takes another hit. If you remember what happened in 2008 when the housing market crashed, a lot of people had a hard time with their finances because they lost their job. Having other employable skills opens up your opportunity to still earn money when times are tough.
Take a break
You might be surprised with this tip but when you get a tax refund check, you should also consider getting a break. It can be a vacation, buying something you want, eating out, or even getting a massage. Of course, you should not blow off all your refund money just for this. It means knowing what your limits are and making sure you do not compromise your overall finances because of this.
Invest in your health
A good way to spend your refund money is to invest it in your health. For one, you can choose to get a general check-up to have an idea what areas of your health you need to work on. The more comprehensive the test is, the better. This means a series of tests and doctors looking over your file to help point you in the right direction.
You can also choose to use the money to enroll in exercise classes to help you get moving. It can be yoga, HIIT, or cardio classes all programmed to make you sweat and live a healthier lifestyle. Enrolling in a gym and getting on a program with a trainer can give you the chance to reach your fitness goals. It can even be as simple as buying a pair of running shoes so you can start jogging in your neighborhood.
The idea is to live an active life to combat a sedentary lifestyle. Sitting for prolonged periods of time in the office or at home can be detrimental to your health. Also, you need to watch what you eat to help you live a healthier lifestyle. Combining proper exercise and nutrition can transform your body into a healthier version of your self.
The tax refund check you get can be used to help you advance your profession or even give you the chance at a healthy lifestyle. You just need to look at your long-term goals to help you decide what to do with the money.