Don't Blow Your Tax Refund on Dumb Shit
There are people out there who regularly spend their tax refund on luxuries such as a big screen TV, new appliances (that replace working ones), computers, or part of a lavish vacation. I think that the percentage of people who actually do this is out of proportion relative to what he hear about through various means available to us. Thus is the plight of the modern world. Information that we obtain is filtered in so many different ways, by the time it reaches our eyes and ears it only resembles a shred of the truth.
I think most people are reasonable and probably don't partake in the aforementioned purchases with their tax refunds. As we know, you should seek to always owe no money at all, or try to pay a little bit come tax time. If your dollar inflates 2% over the course of the year, your $3000 tax return had only about $2950 worth of buying power relative to the previous year. It isn't much, but imagine getting a $50 gift card from the IRS if you end up owing no money. Sounds like a deal to me!
Here's some good moves to make with your tax refund, in order of different stages of "having your shit togetherness."
1.) Pay off high interest debt, including, but not limited to: credit cards, student loans, vehicle loans, the mob for that "favor" back in '09.
2.) High probability or looming repairs on your home, vehicle, or health. If you can see the writing on the wall, address it before it crumbles before your eyes and you're left with your pants down.
3.) In the event that you are debt free (except for a mortgage), add the refund to a safety buffer, if you do not have one. We have discussed in prior posts that obtaining a 6 month all-expenses safety fund is a good idea for many reasons. Get your safety buffer in line before tackling anything else.
4.) Put the funds directly toward a high yield investment. There are vast options here. This could be additional savings toward purchasing a rental property, your first home as an owner, the stock market, or a well timed and price-is-right flip possibility.
5.) Contribute an extra payment(s) to your mortgage. If you are in the youthful stages of a mortgage, a direct off-the principal contribution could save you 100% of the contribution in interest over the life of the loan. That's a guaranteed as long as you don't defer mortgage payments because of it.
6.) Use it to continue your education or enable you to make money in other ways. Supposing you don't have the necessity for options 1-5, you're already balling pretty hard. The only thing to do now is to continue CRUSHING life with your BULK. Take a class that will improve you in some way. It could be a picking up a new skill at your job or spending time and money to launch a personal finance website.