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This post is sponsored by Drive Time, however all opinions and thrill of financial responsibility is 100% mine.
Families would file in as fast as they could, hand over their $5,000 – $10,000 check (not kidding!), and take cold hard cash with them as they left. Many could hardly contain their excitement as I counted out $100 and $50 bills right in front of them.
It was kind of disturbing, especially since their plans for spending said cash never seemed to be in the wisest or most economical way. Most could not wait to tell me how they were going to go blow it on a trip to Disneyland or win big at the local casino. For others, it was a new 60″ HDTV or a pimped out vehicle — that still has years of monthly payments left.
I’m not saying you can’t ever spend money on those things…..I mean, it’s your money, and I’m all about intentional spending. Still, I can’t help but think that if you really want to be financially responsible, using your tax refund in a smart way is a non-negotiable.
Some might call me boring, but I’d much rather go to bed at night knowing that when I spend money, I’ve actually accounted for it, rather than stave off the guilt that comes from an unplanned excursion. I’m not saying it wouldn’t be fun, it just wouldn’t be fun after I got home and looked at my bank account!
So, in all practical-ness, here are 12 ideas for a super wise tax refund investment:
1. Pay Down Credit Card Debt
Credit cards have astronomical interest rates, and that’s money you’re losing every single month. Stop charging, and use your tax refund to pay off what you can.
2. Pay Down Student Loans
If you spent a pretty penny on your education, get rid of your student loan burden by decreasing the amount you owe. This is especially helpful to eliminate before adding marriage and kids to the mix.
3. Pay off Your Car—or Put Money Towards a New One
Think of the extra money you could have to put towards other things if you can eliminate that monthly car payment! If you’re in the market for a replacement or reliable second vehicle, your tax refund can be a huge help in funding or financing another car.
4. Use it for a Down Payment on a House
One of the biggest mistakes people make when buying their first home, is not having enough of a down payment to get started. Use your tax refund to prepare you financially for the next step in your housing journey.
5. Pay Down a Portion of Your Mortgage
Likewise, if you already have a home and still owe money on it, pay down a portion of your mortgage to get you closer to debt-free status. It’s going feel so good when you actually own your home!
6. Increase the Value of Your Home
Remodels, repairs, and updates to your home can up your home’s resale value. Replace cheap and worn out countertops, freshen up grout in the bathroom or kitchen, and focus on your home’s curb appeal.
7. Fund an At-Home Business
Have a business idea you’ve always wanted to try? Use your tax refund as capital to fund your start-up. As an entrepreneur myself, I know how important it is to explore ideas and find out exactly where your passion lies. Sometimes it can take a bit of money to figure that out!
8. Establish an Emergency Fund—or Increase the Amount
Emergency funds are a necessary back-up plan for unexpected expenses. If you don’t have one set up yet, it’s time to get started! $1,000 in reserves is great for beginners. Otherwise, increase your emergency fund up to 3 months worth of living expenses.
9. Pledge to Support a Charity
There are so many organizations that are doing a world of good, but they can only do so if they have funding. Consider donating more money to your local church, support a missionary, or give to a charity that lines up with your belief and goals.
10. Open a Certificate of Deposit and Earn Some Interest
Although Certificates of Deposit (CD’s) are not earning as much as they used to, it’s still worth considering. Many still have interest rates that are much better than regular savings accounts.
11. Put it Towards Your Child’s Education
If you have kids, you may want to set aside some of your tax refund to help with their education. Colleges are expensive and tuition is only going to rise in the years to come. Establish a college savings account for them now.
12. Add it to Your Retirement Savings
Retirement isn’t always on everybody’s mind, especially when you’re young, in good health, and have years ahead of you to worry about it. But the fact is, we have to starting thinking about retirement now, and tax season is the perfect reminder to start an IRA. I have one with Capital One 360, and highly recommend them.
Choose one item off this list and think about how good you’ll feel after you apply your refund toward it. Feeling it yet? Trust me, you will!
Temptation, and spending urges can keep you from ever reaching the place you envision for you and your family, and that can have devastating affects on your finances. Why not take this year to do something with your refund that you won’t regret?
I know, it’s boring….and practical….and responsible, but your future self will thank you!
What plans do you have for your tax refund this year?
DriveTime is a Pheonix-based used car dealership devote to helping those with less-then-perfect credit find their perfect car. Shop from more than 10,000 vehicles online and get approved for financing within minutes!
Disclosure: Some of the links in the post above are affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. Read my full disclosure policy here.
This is a sponsored conversation written by me on behalf of DriveTime. The opinions and text are all mine.