By Margaret Daniels
If you’re one of the millions getting a tax refund this year – before that electronic deposit gets eaten away by everyday expenses and lattes, or you’re tempted to splurge on a big-ticket purchase – take a look at some simple ways to help you stretch those dollars and get the most out of your tax refund!
#1 – Let it Grow
With the magic of compounding interest and time, consider putting your lump sum into a savings or retirement account and watch it grow! For example, a $3,000 deposit will grow to $13,983 over 20 years (based on an 8% rate of return). If you have shorter-range savings goals, look at opening a Certificate of Deposit or Money Market account, which may offer higher interest rates than a traditional savings account.
#2 – Pay it Down
If you have credit card or other debt, paying it off will save you the cost of the interest. For example, if you have a $1,000 card balance, you could save $200 in interest by paying it off now rather than carrying the balance for a year (20% annual percentage rate).
#3 – Go Green
Make your home more energy efficient – and generate savings for years to come. Switching out your old fixtures to low-flow faucets and showerheads could save you as much as 50 percent on your water usage (according to Energy Star). Installing a programmable thermostat could save you around $150 a year on your electric bill (when used properly).
#4 – Pre-pay your Vacay
If you’re planning on taking a vacation this year, use your tax refund and pre-pay. You can typically save money by booking your travel early. Just make sure to review the refund policies and terms, in case your plans change or you have to cancel.
#5 – Give Back
Making a donation to your favorite non-profit charity will not only make you feel good, but may also count as a deduction at tax time with the proper proof (e.g., bank statement, canceled check, etc.). And since everyone’s situation is different, it’s always advisable to consult a tax professional for tax advice.
Tip: Give yourself a raise!
If you received a large refund and feel like you had too many taxes withheld from your paycheck, you may want to change your withholding and enjoy some extra money in your paycheck!
Just for Fun – Invest in an experience!
Build some memories by treating yourself to an experience. Here are a few ideas:
- Treat yourself to a spa day (or week!)
- Try an extreme sports adventure (at your own risk!) — Skydiving, white-water river rafting, zip-lining or race car driving!
- Take a class just for fun or to learn new skills for your career
- Tour a vineyard or distillery
- Give yourself the gift of travel
- Buy an annual pass to a favorite place like a museum, symphony, the zoo or Disneyland.