The best way to handle any money that the IRS sends back your way is to make plans for the tax refund. Even if you have nothing in place before you file there should be plenty of time after the forms have been signed and sent to make arrangements for investing and spending the refund. Federal refunds can take weeks to come back in the mail and up to 10 days to be direct deposited.
Tax season may kick off with the turn of the New Year. Business and individuals scramble to gather up receipts, organize records and prepare the numbers that are needed to fill out tax forms. But the real challenge starts after the filing when plans or made for spending any return that is expected.
Best Uses for Tax Refunds
1. Pay down debt. Depending on the size of the refund, the money could be used to pay off smaller credit card or other rotating credit balances. Using the money to pay off debt will help to build a stronger financial future.
2. Prepare for troubles that may lie ahead. Most financial experts recommend that an emergency savings account (to handle unexpected repairs, appliances purchases or even medical bills) be set up to ensure a solid financial situation for tomorrow. Make a plan to use the tax refund to start a small emergency savings or to completely fund this anchor against future financial storms.
3. Make a large purchase. Begin shopping around for a great deal on that needed appliance, used car or even home. Having that large tax refund makes negotiations a little easier. Taking the time to shop around while you are waiting for the return to come in allows you to find the best deal possible.
4. Start storing away for the future. Put the money towards your retirement fund or other investment to fund the future. Be sure to talk with your financial expert because there are monetary limits that can be deposited in some types of accounts each year.
5. Launch that new business. Tax refunds can be the perfect seed for planting a dream. Use the money to secure a location for a new store front or to purchase equipment to start that long desired entrepreneurial endeavor.
The ways a lump sum of cash can be used will often only be limited by the size of the lump and the thoughts of the one doing the spending. A little time and energy invested into a plan for using a tax refund can help make the most of whatever size lump it turns out to be.
Preparing for the Tax Refund
1. Make a list of all the expenses that need to be paid.
2. Make a list of all expected purchases that will be needed in the near future.
3. Make a list of all the different things that you want to do with a lump sum of cash.
4. Review all the lists and put a monetary value next to each one.
5. Put a star next to the three that are the most important.
6. Put a circle around the three that will be the most valuable to your financial future and your family.
7. Put a line through the ones that are the least important.
8. Number the remaining items in order of importance.
9. Now review what you have written. Are the top six the ones that you circled and put stars next to?
10. Begin to calculate how many of the different items can be accomplished with the tax refund.
The more planning that goes into using the tax refund the more you will be able to accomplish with that one lump sum of cash.
Author Bio : This post is shared by one of our active users Mark Rodgers who has been blogging about finance and various other topics for 3 years. Currently he contributes to blogs about sites to find online insurance quotes and how to prep for the dmv test.