Tax time is coming to an end and the first quarter of 2017 is almost over. That means we might be seeing some extra cash from the government and/or our employers. Tax refunds and bonuses can really help our financial situations. In the past, I’ve used funds to pay off medical bills and save for a downpayment on my home. Here are a few more ways to maximize your refund:
A love offering to your church or donation to your favorite charity can help someone in need. It can also be used as a tax deduction for the following year. You might also consider volunteering your time as a way to give back to the community. Find a cause that you’re interested in supporting and see what they may need this season.
Check your emergency fund and fill it up if you haven’t already. If you have a pad of cash tucked away that’s great! Start putting aside for a new car, deposit on a new apartment, downpayment for a home, house repairs, or your dream vacation.
Play Catch Up
Pay your outstanding bills. If you have anything in collections, contact the agency to discuss your options and how you can reduce the amount you owe by paying the account off. Owe anyone for loaning you some extra cash, pay them back and let them know how much you appreciate their help! More cash left over, knock out your smallest credit card bill.
Have a spa day or take a vacation! Head out for a day of refreshment by jumping in the car and going to a nearby resort. Use Groupon to find the best deals. Or purchase a few items you’ve been dying to add to your wardrobe!
Open a Roth IRA
A Roth IRA is a retirement account that allows you to set aside after-tax income. Roth’s are limited to a specified amount each year, find details here. The benefit of a Roth IRA is you pay taxes on all incoming funds going into your account and then all future withdrawals are tax-free depending on if the withdrawal is a qualified distribution.
Make an extra payment on your mortgage
An additional payment on your mortgage each year shortens the length of your loan and reduces the amount of interest you have to pay. Who likes to pay interest? Not me! If you currently don’t own a home save one month’s rent just in case and use it towards your next apartment or for a downpayment on a home.
My first year working in Finance I received a year-end cash bonus of $500. Less than 72 hours after receiving my bonus I got sick and was admitted to the hospital for a week. A few days after getting admitted, my landlord sold the condo I was in and needed me to be out as soon as possible. I got hit from every angle but thank God I hadn’t tricked my bonus off at the mall or spent it on a day of pampering. My bonus covered my co-pays for two ER visits, meds, and movers.
I share all of this to say, you can really make the most of the extra cash you receive from tax refunds and bonuses. After all, who can predict a month out when it might rain. Protect your finances with an umbrella by maximizing and making the most of the extra money you receive.