How to use your tax refund responsibly

On Behalf of | Mar 27, 2019 | Bankruptcy

You work hard for your money, so giving too much of it up to taxes can be frustrating. Thankfully, millions of Americans are going to get that money back in tax returns this year.

If you’re feeling desperate for your tax return, keep these tips in mind after you get it to take advantage of the money.

Pay off debts

For those who receive upwards of $1,000 in tax returns, this money could make a dent in your debt you’d otherwise have to work months for. While the added bonus may feel like free money, remember that this is cash you worked an entire year to earn.

Spending it wisely could be what you need to work toward getting out from underneath unpaid debts.

Save some

It may also be beneficial for you to pay only part of your debts and add the rest of your refund into savings. Recent studies show that 40 percent of Americans – that’s almost half of all Americans – can’t afford to cover a $400 emergency expense.

With millions of car accidents each year, coupled with unexpected illnesses and job cuts, you’re more than likely to encounter an emergency at some point in life that costs at least $400 in expenses. A refund is perfect for your emergency savings account because you won’t miss the money you never had until you really need it in an emergency.

Small indulgences

Life is too short not to stop and smell the roses. When you get a larger sum of money in your tax fund, it’s okay to treat yourself! However, it’s important to take a hard look at your financial circumstances before using your return to splurge any large amount of money.

Some of the busiest times of the year for car dealerships is during tax return season. Big purchases like this may be okay if they’re not impulsive. But, if it’d be more responsible to pay off debt and save money than to buy a new car, consider treating yourself with small indulgences, such as:

  • Ice cream
  • A new movie or videogame
  • Going out to dinner
  • A new candle

All of these practices can help you get into positive money management habits. However, if you have already found yourself unable to save money or treat yourself to the very basic necessities, you should consider bankruptcy protection. Learning more about your bankruptcy options may make for the best use of your tax return.

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