As April draws closer so does the dreaded Tax Season. If you are like most Americans, tax season can be a stressful time. Questions seem to loom in your mind as you gather all the necessary paperwork. Do you have your W2's, Stock information, Business income, IRA/ pension distributions, Rental property income and the list goes on. But in that dread there can be a positive. You may be receiving a substantial return on some of your income that the government has borrowed.
With this return of money, many are inclined to spend it immediately as if it were a bonus. Here are a few ways to rethink what to do with your Income Tax Return.
1. Put it away immediately into a savings account. As soon as you receive the return, put it into your savings account and don't think about it. Treat it as money borrowed from the government and you are paying yourself back. If it's in your checking account you are more likely to spend it. If it's hard to access or you have to transfer it over to your savings first you will rethink your choice.
2. Pay off your credit card or car loan. Pay off the high interest debt first and always pay more than the minimum payment. Paying off debt can bring a host of benefits to our lives. It will restore self esteem and help you seek other life goals.
3. Find ways to invest in yourself or family members that will benefit yourself for the future. Learn a new skill, take a class, exercise, educate yourself by reading more books, talk with a mentor on ways to save or invest for the future.
4. Add to an emergency fund. It's important to create an emergency fund and continue to add it it. Nothing in this life is guaranteed. Would you be able to survive if you or your partner got sick? If you had a job loss? Death in your family? It's never a waste to be prepared for what life throws at us.
5. Give to others. Being generous with others creates a rippling effect that can transform your lives and the lives of others. Being generous also promotes longevity. Research shows that giving produces both emotional and physiological changes in our bodies that lead to life long health.
6. Indulge a little. If you have been working hard, it's important to reward yourself with a little splurge. Go out for a nice dinner, buy that outfit, get that new couch. Many times people get this part wrong and spend all of their return on indulgences. Where indulgences are important, it's not a priority.