The Covid-19 pandemic has significantly dented the current world’s economy. For this reason, the main question on people’s minds is, “how can I spend this penny to realize its full value?” The scenario is not different when it comes to spending your tax returns. The majority of people dread tax season, but with it comes one fantastic thing – tax returns. Although this is not free money, it always feels good to have extra money in your pocket.
What is a Tax Return?
Everyone, whether self-employed or not, is liable to pay taxes to the government. This is done by filing a form with IRS (Internal Revenue Services) and the state government. Once the annual calculations are done, and it appears you paid more in state and federal taxes, the government will cut you a check for the overpaid amount. This “refund” is what is known as Tax Returns. According to IRS’s May 10th, 2019 report, the average tax refund was $3000.
When this money comes in, it can be effortless for you to spend it on frivolous things without thinking about the future. For instance, you might be tempted to get a pricey tattoo, which amounts to an unnecessary expense. However, there are better things you can do or buy with your tax return money.
A Vacation
Taking a vacation comes as no surprise because the first person who should benefit from your money is YOU! Maybe you have that trip you have been postponing due to your financial position. This is the time to book that flight and give yourself a sweet short holiday. It is upon you to decide to visit those museums, cruise through countries with vineyards, spend some time at sandy beaches, or anything else that sounds relaxing to you. Having such a trip is one of the best rewards for successfully going through another tax season without any significant issues. You can agree that taking a vacation is one of the best things to buy with a tax return.
Who does not need a break from normal life? The most appropriate way of doing so is by taking a vacation. In the current world, there are so many destinations that you can pick from and get the experience of a lifetime. However, you must remember that the destination you settle for will go hand-in-hand with how much you receive in your tax returns. If you had put off a vacation and the money you receive as your tax returns do not cover the expenses, it would be a bad idea to take the vacation.
Home Renovations
What can I do to improve my home? Where can I get the funds to renovate it? These are some of the questions that linger in the majority of homeowner’s minds. However, the most crucial thing of them all is how to get the funds for such a project. If you have some tax returns, you are on the right track. Maintaining your driveway and yard, updating your interior décor, fixing your outdoor lighting, hiring a roofing contractor and HVAC contractors are all appropriate ways to spend your tax refund dollars. Your refund may not be enough to do a complete kitchen or bathroom make-over, but it can surely cover some expenses. Closet organizers, bathroom fixtures, and a programmable thermostat are some of the best things to buy with the tax return.
Besides adding to your home’s aesthetics, such improvements could have a remarkable influence on your home’s return on investment. However, you should not concentrate so much on value addition, especially if you do not intend to sell your residence any time soon. Home improvements will increase your enjoyment of your space, making it one of the best things to buy with tax returns.
Invest in Yourself
As we mentioned earlier, no one else is in a better position to spend your tax returns than you. Therefore, investing in yourself is one of the most significant things to buy with the tax return. If you’ve always wanted a beautiful, straight smile, now might be the time to invest in some orthodontic treatment for adults or get some cosmetic dentistry services. Hot tubs are a great way to invest in serious relaxation.
Additionally, you can think of gaining more knowledge, either in your field of specialization or a different one. For instance, paying for additional training or tuition is one of the best things to buy with tax returns. Additionally, attending work-related conferences and paying for a professional organization membership can help you gain more experience and get better paychecks and job stability in the future. If you are willing to invest in yourself, doing it with tax return dollars is a wise idea.
Car Maintenance
Your vehicle has been with you through tax season. So, why not give it a treat after receiving your tax returns? A car requires regular maintenance to keep it working correctly. If you are a camping fanatic, you can outsource RV repair service using your tax returns to have your recreational vehicle checked out by an expert. You can check out the regular auto repairs and maintenance services to keep them appropriately functional. Car repairs and maintenance are some of the best things to buy with a tax return because you will reap their benefits at the end of it all.
It is evident that you do not want your vehicle failing you, especially when you do not have extra cash to spare for its maintenance and repairs. Therefore, the best time to ensure that your vehicle is in good condition is when you receive your tax returns. In the same vein, paying for your car loan is one of the best things to buy with a tax return. It is a great relief when you offset your car loan because you will rid yourself of the pesky monthly payments.
Insurance Coverage
Buying insurance ranks as one of the best things to buy with tax return. Before anything else, spending your money to get the best health services is a recommendable step. Having the best health insurance plan for you and your family is a wise life decision. One of the best decisions you can make is getting a comprehensive health insurance plan using your tax returns.
Fortunately, today, the health insurance domain covers almost any budget, whether it is membership association health plans, privacy policies, or even public ACA exchanges. You can visit a health insurance broker for guidance to make sure you get the best plan for your needs. Besides health insurance, you can also use the tax returns to pay for homeowner’s insurance against robbery, theft, and natural calamities. Additionally, you can pay for liability insurance, which covers the expense if someone is hurt in your home or by your car.
Contribute to Your Retirement Savings
If you do not have a stable retirement saving plan, you can be sure that those will be the most challenging years of your life. If you have tax returns, you can begin funding your retirement savings account. One of the absolute ways to build lasting wealth is by letting this and the future tax returns accumulate. With that, you will be creating future financial freedom. Funding your retirement account is, of course, one of the best ways to use your tax return
Whether you own a 401(k), an IRA, or a Roth IRA account, it is recommended to put some or all of your tax returns into this account to fund your future. In 2018, if you had a Roth IRA account, you could fund it with up to $5500 or $6500 if you were 50 years old or older. If you are retired and working part-time, you can still contribute to a Roth IRA. However, if you earn too much for the Roth IRA, you can contribute to the traditional IRA and later convert it to a Roth. With such a decision, you can be certain your future is well-secured.
Invest
If saving money in your retirement account seems like a burden to you, many other investment opportunities make it to the list of the best things to buy with tax return. Mutual funds and stocks are the most traditional investment routes. However, you have other investment methods at your disposal, including Robo-advisors, crypto-currency, and real estate crowdfunding.
With the current technological transformation, Bitcoin and other cryptocurrencies have become the order of the day. Moreover, Bitcoin is being accepted as a legit mode of payment by various retailers around the world. However, you will need to get more detailed information about investing in crypto-currencies before taking your first step down that lane. Real estate crowdfunding involves lending money to other potential investors looking to buy real estate. This is a much safer investment plan.
Reduce Credit Card Debt
No one wants to be in debt, but sometimes it is inevitable. If you have some debt, one of the best things to buy with tax returns is ensuring that you clear part, if not all, of the money you owe. Credit card debt is more severe and expensive because it needs to be paid off every month. Credit debt is one thing in your life that can hinder you from achieving set long-term financial goals. Using the snowball method is one of the most effective ways of clearing your debts. This method involves clearing the smallest debt first by putting in all your available money and focusing the minimum payments on other debts. Once the smallest debt is cleared, you can then put all your funds in the next smallest debt, and the cycle goes on and on. The ‘snowball’ analogy is supported because you have more money available as you settle each debt.
Form a Will/ Living Trust
An estate plan is a requirement for everyone, whether poor or rich because when you die, you leave behind property that must be shared accordingly among your loved ones. Not having an estate plan will cause unnecessary chaos and drama between your family members. Hiring an attorney is a sure way to see that all your wishes are honored. It’s also important to revisit your will or living trust after making life decisions such as getting married, selling a home, or having children.
Final Thought
Tax returns are not there to be misused. It is imperative to ensure this money goes towards a noble cause. You can put this money into many areas, but the above are the most important and impactful in your life.