2 Ways to Better Use Your Tax Return Money

If there’s one thing we can all agree on, it’s that no one (and we mean no one!) likes tax season. For most of us, the formulas and deductions are too complex, and tax prep is literally the last thing we want to worry about after a long day of work.

There is, however, one benefit to filing all those W-2’s and saving all of those receipts to write off against your 1099’s, and that’s your tax return money. Depending on what seems to be dozens of different things from withholdings to bracketing, you could be expecting quite a nice chunk of change back come springtime; therefore it is important to put that money to good use for you and your family.

Since your return can change from year to year, and at times by a wide margin, it’s best to view this income as an unexpected bonus rather than a reliable means of funding. That is why you should do something “special” with it when it comes in, rather than just blow it all on the normal groceries you’ve already budgeted for.

Here are two ways that your family can greatly benefit from wise planning and the careful allotment of your tax return money.

1. Put it Back into Your Home – Considering the fact that your home is not just your largest asset, but the main setting for your family’s life together, it makes perfect sense to invest some of your tax return money into repairs, additions, and other projects. While putting up a new white vinyl fence or updating your kid’s room for the first time since he was in diapers may seem like the most pressing needs, don’t forget to also allocate some of your return money towards paying off a portion of your principle as well. If you get a nice unexpected amount of money come tax season, leveraging it to effectively lower your monthly mortgage payments can significantly increase your ability to further branch out your budgets for other family needs. Find the proper balance between home improvements and lightening the ongoing cost of your home.

2. Refresh or Add to All of Your Savings Funds- The smartest families are the ones that plan the best, and a great way to set aside proper savings for the future is to establish separate funds for the many goals your family may have. For many of us that means setting up a college savings account for the kids or refilling the “vacation jar” for a special trip you’ve been dreaming of with your spouse. Not all of these funds need to be allocated for planned events, however, and experts suggest that families should absolutely begin putting together a special side account for emergency situations as soon as possible. Let’s face it, things happen, and whether it’s a broken arm during a training wheels experience or a flood from the hot water heater in your basement, you’ll be able to handle life’s many twists and turns much more easily if you plan ahead with a little money set aside for “disaster relief.” Your tax return provides the perfect opportunity for either kickstarting or refilling these essential funds and accounts; you won’t be pulling in money that was previously budgeted for other parts of your life so it’s a win-win that won’t be felt by your wallet at all.