How to Stretch Your Tax Refund
Tax Day is almost here, which means that you are even closer to getting your tax refund. Because most people don't plan on getting cash back into their budget, it can be difficult to decide how to use your refund. If you're one of the 97 million Americans receiving a check from Uncle Sam, it's very temping to splurge instead of save.
With the average taxpayer receiving $3,052 back this year, what are responsible ways to use that extra cash? Here are some of our suggestions on how to use that money wisely.
Set Aside Your Refund for Savings
Most financial planning experts consider taxes part of your earnings, but not as part of your earned income. Although your annual tax refund could help fund a summer vacation or a month full of groceries, the smartest choice is to save your money for a rainy day.
If you don't have an emergency fund, this is a great opportunity to create one. Unplanned expenses are the worst kind, so Mattress Firm recommends proactive planning by saving. Having money set aside for those "just in case" situations will help you stay out of debt and prepare for the future.
Pay It Forward
Give yourself an extra cushion for the next few months and pay ahead on some of your expenses. It may not be exciting as a new TV, but paying off your credit card or taking care of your utility bills will be a huge relief later.
Even if you don't pay these bills in advance, consider setting aside money for three to six months of expenses. Not only will you have your upcoming utility expenses covered, but you will also have some extra spending money left in your bank account. Trust us, your spring and summer energy bills will thank you.
Don't Splurge, Shop Smart
With promotional prices on non-essential products, Mattress Firm knows it's tempting to splurge. Instead of blowing your budget on something you don't really need, use your tax refund to replace an essential item. Whether that means putting money away for a new car or finally upgrading your refrigerator, try to spend your extra cash on an item you will use daily. Of course, at Mattress Firm, we're partial to making sure that your mattress isn't in need of replacement — if it is, now is a good time to look into replacing it at a cost you can afford.
Replacements and repairs are not something we normally remember to budget for, so your annual refund is a great way to make these updates without worrying your wallet.
Plan for the Future
Financial experts also recommend setting the money aside for larger upcoming expenses. Are you sending kids to college or planning for retirement? If this is not already in your savings plan, using your tax refund to start these personal funds is essential.
Although it may be difficult to put all of your refund aside for later use, your future self with thank you. Being prepared for bigger budget items will help reduce your overall debt and keep you financially stable when it is time to pay up.