Is there anyone who doesn’t enjoy receiving their tax return this time of year? While it’s tempting to splurge on something you’ve had your eye on or a weekend getaway, why not make your return work for you? Here are some tips to get you started.
Follow the 50-30-20 rule
A basic budgeting tool is the 50-30-20 ratio rule. The rule is that for every paycheck you receive, 20% should be saved, 30% goes towards housing or monthly bills and 50% goes towards everything else (other bills, entertainment etc.) When you get your tax return and don’t know how to apply it to your finances, this approach is a good start. If you don’t need to apply the extra money to your monthly bills, try making an additional payment towards credit card or other debt or let that be your splurge money.
Start an emergency fund
Having a goal of 3-6 months of income for an emergency fund is a tall order. Sometimes getting started is the hardest part and a boost from your return could give you the push you need to begin contributing regularly until you reach your goal.
Put it towards your career
Have you had your eye on a seminar series or a local professional conference? Something that could give you an edge in that promotion you’ve been working towards? Use the extra income to take a class or go to a networking conference. The connections you meet or the skills you gain could open doors at work that might not have been possible before.
Improve your home
Making improvements to your home, like adding energy efficient appliances, updating a bathroom or cleaning up your landscaping could add value to your property. A little extra income could go a long way in improving your home and your comfort level.
High interest debt can be an uphill battle to pay down. Get ahead by putting a chunk of your return towards your debt with the highest interest and enjoy a little breathing room.
A tax return is a great opportunity to make your financial life breathe a little easier. These options are great alone or can be mixed and matched to make your return work best for you and your goals.