It’s almost that time of year, when many Americans begin looking forward to their tax returns. Now is the perfect time to think about what to do with all that extra cash. Planning will help you make smart choices and set you up for a financially successful and fun 2018.

tax refund

It's Your Money

It’s important to understand that in most cases, tax return money represents the amount you overpaid the government throughout the year. The money is yours. It may be tempting to treat it like fun money.

For people who stick to a tight budget throughout the year, this windfall may feel like a relief. Making a plan for the money before it arrives helps you get the most out of this extra cash.

1. Use your tax return to save money

Paying down high-interest credit card debt saves you from having to pay future interest charges. Use even $1,000 or your tax return to pay off debt that’s racking up interest, and you’ll avoid unnecessary interest charges.

2. Improve the quality of life at home

Tired of your barely-working dishwasher? Ready for a more spacious refrigerator? Maybe your couch is beaten up and beyond repair or your dryer needs three cycles to get your clothes dry. Choose one appliance or piece of furniture in your home to replace. You’ll enjoy the upgrade for years to come.

3. Treat yourself

Even if it isn’t in your nature to splurge, investing in something you need or want could pay off in many ways. Taking a class, learning a new skill, or developing a hobby are all great investments.

Is there a class you could take that would help you earn an additional certification or promotion? Learning a new skill is always a smart investment.

Maybe you just want new work boots, or your wardrobe needs an upgrade. Focus on high-quality items and buy fewer of them. There’s a great deal of value in having a few things that are well made and work for you.

4. Add to your seasonal expenses fund

If you have a savings account dedicated to seasonal expenses like back to school, a spring break trip, or the holidays, put a little bit of extra money in it and enjoy a splurge later in the year.

5. Do something you’ve been putting off

If you know your car needs tires, but you didn’t want to dip into your saving account to pay for it, taking care of it before you get a flat or simply can’t wait any longer is a smart move. New tires often mean better gas mileage, so this is one upgrade that pays off.

Everyone has something that’s nagging at them. An unpaid bill, a trip to the dentist, calling a plumber to fix the toilet that runs constantly; taking care of it with a portion of your tax return will help free your mind for more important things.

There are things you can do with your tax refund that will help you save or make more money in the long run. It doesn’t have to be all work and no play, though. Planning ahead will help you make smart decisions about how to use your refund to reach your financial goals and have more fun in 2018.

Taxes can be overwhelming. That's why we've created the Sunset Finance Guide to Tax Returns to provide you with more information.

January 4, 2018
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