Spend your tax refund wisely

Published 12:45 pm Tuesday, February 14, 2023


UK-Boyle County Extension

It’s that time of year when we get excited about our tax refunds. By responsibly using this one-time infusion of cash, you can improve your financial standing. Making responsible financial decisions may not sound as fun as buying a new flat screen TV or getting a new tattoo, but there are some things that can be just as sweet.

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You could wisely use your tax refund to add to your emergency savings account. Most of us do not have enough money saved in the event of job loss, sickness or another unexpected event that prevents us from working. Most financial experts recommend having at least six months of your income saved to help you work through a financial hardship. This fund can also help you cover unexpected or emergency household repairs. When those unplanned expenses pop up, and let’s be honest they will and you know it, it’s nice to have money available to cover those costs. Emergency savings help relieve the feeling of financial uncertainty by creating a security blanket for those unforeseen expenses.

You could also choose to reduce your debt with your tax refund. Paying off high-interest debt as quickly as possible is a financial win-win because it reduces the principle on your loan and lowers your future interest payments. Look for opportunities such as paying more towards your car payment or a high interest credit card. Settling debt helps improve your credit score so using your tax refund to do so would be beneficial in two ways.

Investing in your family’s future is always a wise move as it will continue to guarantee your future financial stability. You could use your return to start or add a college savings fund for your children or start or add to your retirement account. Saving for retirement is extremely important. It gives you the power to continue living a comfortable lifestyle during retirement.

If you must spend your tax refund, make wise spending choices. Consider purchases that allow you to make improvements that add to the resale value of your vehicle or home or home improvements that lower your energy costs.

Here’s the part where I mention splurging just a little bit. Make moves toward paying down debt and adding to your savings but save just a little for something you like. I don’t use the word moderation only to refer to cheat days with unhealthy foods. You can exercise moderation when spending on things you want to buy as well. Make a small purchase just for you. Get a massage or treat the family to a dinner out and a movie. Maybe put a little tax refund money in savings for something bigger like a family vacation or that giant flat screen TV.

Financial security stems from making smart financial decisions such as those mentioned in this article.

Be wise with your money. It always pays off in the long run.

More information on family financial education is available by contacting the Boyle County Extension office or email a.price@uky.edu.