While it’s commonly advised that you should lower you tax deductions so that you don’t receive a tax refund, I don’t feel this is always good advice. In fact, I’ve received a tax refund most years of my life and very much enjoy getting a lump sum of money.
While I also highly advocate saving incremental amounts of money over time, there’s no denying that it feels good when a lump sum of money hits your bank account. If you’ve found yourself in a situation with some extra money here are some ideas for using it beneficially.
Catch Up on Your Bills
If you’re delinquent on any of your bills now is the perfect time to get them caught up. Take your extra money and catch up on any overdue bills.
If you have money left over after that here are some other things you should do:
Buy the Things You Need
This tips applies mainly if you’ve been living paycheck to paycheck and haven’t been able to make important purchases that you need to make.
If your car needs repairs, your washing machine broke or kids have seriously outgrown their shoes then use the money to remedy these problems.
Again, if you’re living paycheck to paycheck and want to use the extra money to improve your life you need to carefully spend the money and make sure that you are covering all the things that you and your family actually need and not just the things that everyone wants.
Put it Toward an Emergency Fund
If your bills are all caught up and there’s nothing you need to buy but have yet to establish an emergency fund filled with 3-6 months’ worth of expenses now is a great time to do so.
Use all or a portion of your tax refund (or other extra money) and put it in a savings account. (I prefer to use online savings accounts like Capital One 360 for savings like these.)
Divvy Up Among Other Financial Goals
Lastly if you have money left over after meeting your other obligations you can divvy it up among your various financial goals and of course, spend a percentage on something fun for you and your family.
How do you normally use extra money you receive?