How To Spend Your Tax Refund in 2024
Tax season is upon us! Many people grumble at the mere thought, while others look forward to this time of the year. I could write a whole post about how the government holds on to your money, interest free, all year, but I won’t. This post is merely sharing ways to spend your tax refund responsibly and with the future in mind!
Emergency Fund
Some experts will recommend a $1000 starter emergency fund. My husband and I never found that to be sufficient. Most home or car repairs we ended up having in an emergency situation were closer to $3000+. We chose to make our starter emergency fund, $6000. This was helpful to us several times. If we had a $2000 or $5000 emergency, our fund wasn’t drained and it wasn’t totally defeating to build it back up. When you have a small fund, if you run into a big emergency, most of it goes on the credit card anyways and it continues the cycle of debt and paycheck-to-paycheck living circumstances.
If you already have your debt paid off, work on building up 3-6 months in your emergency fund savings account.
Pay Off Debt
For many years, this is straight where all of our extra money went. Tax check, work bonuses, unused grocery budget money. Debt is such a burden. Help lift that burden by throwing a large lump sum at it! Even if you can’t put the whole check into it, at least a portion will make a difference!
Pay Bills
Behind on your bills? Use your check to catch up! Caught up? We like having a months worth of bills in our bill pay account. This would be a good time to add to that. This way, you can budget your bills weekly and just pay them as they come in. No need to worry about having this much money by this date if you’re a month ahead.
Stock Up
Many people love shopping at membership stores like Sam’s Club and Costco. The problem is these are usually the culprit in blowing people’s budgets. Consider using your tax check to stock up on needed items when they’re on sale. Toilet paper, coffee, vitamins, laundry soap, whatever you use frequently!
Another great way to stock up, is purchasing meat in bulk. Go in with another family for a cow and have meat for most, if not all of the year!
Renovations
One year, our plumbing backed up, ruining our flooring in 4/6 rooms and the cabinets in our bathroom. Insurance covered it, but we got amazing deals on our floor and cabinet! Stores count on people using their tax money to do repairs or upgrades, so they have mega sales. It can be a great time of the year to buy things for the home!
Also consider using your check to get your yearly inspections or upkeep. Need your vents checked? Carpets cleaned? New landscape? Another great way to utilize those dollars.
Sinking Funds
Sinking funds are smaller, short term savings accounts. Saving up for Christmas, back to school clothes, car registration, and yearly memberships are good sinking funds to have. Imagine having your entire Christmas budget saved up by April?!
Buy a Car
If you’re in NEED of a new (to you) vehicle, tax checks can be great ways to pay cash for a car. I know used vehicles have risen in price in recent years, so even if your tax refund doesn’t cover the whole cost, it can make a nice down payment.
Fulfill Needs
Need a new mattress? Kids need clothes? Haven’t had a haircut in awhile? Using your tax check can be an awesome way to meet needs you may not always be able to fill from your monthly budget.
Travel
Debt paid off? Emergency fund full? Bills paid ahead? Consider using your tax for a nice family vacation! Notice I said nice, not expensive! Check out this post for how to travel on a budget!
Even if you’re knee deep in paying off debt, consider putting away a small amount to a fun trip to the zoo or a local amusement park. I know some people say you shouldn’t vacation at all if you’re paying off debt, but our children are only small once. We can take them fun places without spending a fortune.
Medical Checkups
You’d be surprised how many people don’t have medical insurance or can’t afford the deductibles! I was one of them for a couple of years. Use your tax dollars to get your yearly physical, eyes checked, and teeth cleaned!
Kid’s Savings Account
Consider opening up a savings account for your kiddos. Whether for college or a nice nest egg, this would be a wonderful use for your tax check!
The most common college savings plan is a 529, which is an account operated by a state, state agency, or educational institution. It allows you to set money aside for educational expenses such as tuition, room and board, and supplies.
These plans can be used at any accredited college or university in any state. The growth in a 529 Savings Plan is tax-free, and withdrawals will never be taxed as long as the funds are used for the sole purpose of higher education.
Retirement
When it comes to retirement, the sooner you start saving, the better! Most companies may match your contributions, so if you don’t need the money for bills or debt, your retirement fund would be a good place to put it.
HSA
A health savings account is a tax-advantaged way those covered under a high-deductible medical plan can save for future healthcare expenses. Most contributions are made pre-tax and earnings typically grow tax-free. Any unused money is rolled over at the end of the year for future use.
My family has one of these and they’re great. My husband’s company puts an amount in each year as well. They’re definitely worth looking into.
