Smart Financial Planning: What to Do With Your Tax Refund

Posted by Jim Peters  at March 4th, 2013

Tax time is almost over. If you sought the services of a CPA, you are highly likely to have incurred some expenditure that would allow you to apply for a tax refund. The largest proportion of tax refund applications is approved. If you are used to receiving refunds every year, you may not understand why you are refunded. A tax refund is your legal right thus you should not take it as if the IRS is giving bonuses for a job well done of paying taxes. Some think that this is some sort of bonus thus they may not really have a plan on how such funds would be used. However, consider the long-term effect that such annual refunds would have if you used them wisely for a long time like 20 years.

Have you been a good steward of your refunds?

If you cannot account for how you have been using your refunds since you started claiming them, its time to take a different approach considering the ever-changing economic times. Here are some tips on how you can make your positive use of your money.

Pay off any debts

These refunds come in handy in settling any outstanding debts like credit card debts. You may even raise your credit rating by settling many of your debts. This can help cushion you in case of liquidity problems that make it hard to settle your debts later in the year.

How much refund do you expect?

In many occasions, if you have too much disposable income, you are highly likely to spend more. You may be tempted to buy non-essential items since you have a feeling that the money is not hard earned. However, try not to withhold too much money to avoid impulse buying.

Set up an emergency kitty

Things are not always going to be rosy financially. It is therefore important to set aside adequate funds for emergencies. You have to be ready for any unforeseen occurrences by having enough savings for emergencies.

College education

Invest in ensuring that your kids get the best possible education. You may also enroll in a college of your choice to enhance your knowledge/skills.

Repair your house and car

You can have a thorough overhaul to ensure anything that may threaten functionality is solved.

Give the rest to charity

Consider donating some of your surpluses to charity.

About the Author
Jim Peters is the Owner of Centaurus Financial Inc., which is a team of highly qualified certified financial planners based in Irvine, California. As an Orange County financial planner and advisor, Jim and his experienced team offer a wide range of services and products for both individuals and business owners, helping their clients pursue and reach their financial goals. Google+