Pay Down Debt
This one I personally love - it is not only the responsible thing to do, it lifts a very heavy burden off of your shoulders, allowing you to be less stressed about what you owe and also allowing you to indulge a bit the next time you have money to spare. The question is however, which debt do you make a priority? In my experience, the best place to start would be eliminating your highest interest rate debts. Paying these off first will save you money in interest in the long run. Ultimately, you need to make sure you are paying off debt wisely; choose debt that will make a difference in either your monthly budget or debt that will boost your credit score. Paying off only a partial amount of something does not necessarily help you if your payment and interest rate stay the same. To help you sort this out, we offer financial counselors that can help decide what to pay off.
Build an emergency fund
This one I struggle with every year. No matter how hard I try, I always find something that needs to be fixed or something that needs to be paid off. Other times, I might just be a bit naughty and indulge a bit here and there (everyone is entitled to treat themselves now and then!). Everyone should have an emergency fund set up in case life happens, and let's face it - life happens quite a bit. Experts recommend three to six months of income saved for emergencies, which to be honest is a great idea in theory, but in practice? It is just kind of tough. For a lot of people, that means going without for quite a while in order to have that safety net set up for them. While it may be difficult to get that much of an emergency fund saved up, having something in your emergency savings is better than having nothing. While I have slipped in previous years (either through choice or lack of choice), I am going to try and break that streak by actually setting up the best emergency fund that I can afford.
Fund Your Retirement
This is a popular option for many generation groups. With the economy and world state where it is, using some of your refund to pad your retirement account is a great idea. Doing so can only help you in the long run. If you need some advice or help we have an Investment Guru on staff to answer all of your questions and direct you to the best choice for your situation.
Complete a Home Improvement Project
Are you dying to remodel your bathroom? Does your deck need refinishing? Do you want to add an office or workout area for your own personal use? Using your tax refund to add value to your home is always a great option. Anything you can do to increase the value of your home will help you in the long run. Home improvements are expensive for sure, but they are well worth it if they is done correctly. Make sure you are shopping around for the best deals or complete a do-it-yourself project!
Donate to Charity
This one will give you all of the best feels. Donating to the less fortunate, especially when you have some money to throw around, really helps you feel like you are doing something of value for society. Popular donation places include the Salvation Army, Goodwill, and Safe Space, which takes in old or otherwise unwanted items to give away or sell (with profits going to the needy themselves). Even if you feel you are a bit of a needy person yourself, you may have one or two small items that you can afford to part with for those in worse shape than yourselves. Not only that, you should get receipts from the items you have donated and write them off on your taxes next year.
Along the lines of donating to charity, your tax refund gives you a good opportunity to update your old appliances. Is your dishwasher just not keeping up with the demand of your household? Is your washer on its last leg? Use your income tax refund to update your appliances. Warehouses are always running great sales so you could save a bundle on new appliances. If your old appliances are in okay shape, you could even donate them to charity. Most charitable places will even come pick up your appliances. Win-win!
Treat Yourself
While you should definitely not go too crazy with indulging in this, a thing people are so often forgetting is that happiness is a necessity in life. It is all too common to see people cutting things out of their life that bring them joy, disregarding that dealing with debt and an uncertain future becomes all the more difficult if you can't be happy in the here and now. Consider perhaps spending your tax refund on a vacation to somewhere you have never been, or buying an entertainment product that you have been wanting to get since forever, or even look for a new outfit to make yourself look more attractive. You deserve it!
No matter what option you choose for your income tax refund, make sure you are using it to improve your financial well-being. It can be tempting to take your refund and buy a bunch of stuff you think you need or want but really don’t. There’s nothing better than investing in your future.
*RMCU staff members are not tax professionals. We recommend you seek professional tax advice for any questions.
