Tax

So, You’re Getting a Tax Refund!

BY Mary Hunt TIMEApril 14, 2022 PRINT

Discovering that you’ll be getting a tax refund is certainly not the worst news you’ve had in your life. In fact, it’s easy to see a tax refund as some kind of gift from the universe. But here’s the truth: More than likely, it’s part of your paycheck that you should have been getting all along. Plan now for how you’ll manage it or it could evaporate into thin air. You have options. Choose well.

NO. 1: TREAT IT LIKE A PAYCHECK
Give away 10%, save 10% and put 80% into your household account. That’s a winning formula for all kinds of reasons. Remember it: 10-10-80.

NO. 2: STASH THE WHOLE THING
Your emergency fund (you have one of those, right?) is the likeliest candidate.

NO. 3: OPEN AN IRAAny amount will compound nicely. See your bank.

NO. 4: INVEST
Rich people start out as poor people. If this is money you will not need for at least 10 years, put it to work in the stock market. Speak with a qualified professional.

NO. 5: REDUCE CREDIT CARD BALANCE
You can send any amount any time to your credit card account. Stop using that card and keep paying extra until the balance is at $0.

NO. 6: PREPAY THE MORTGAGE
When you make your next regular mortgage payment, write a second check in the amount of your refund and mark it “Principal Prepayment Only.” Now this will reduce your balance owing, rather that the mortgage company applying it to next month’s interest. To see just how this will affect your payback time and how much interest you won’t have to pay, search online for a mortgage prepayment calculator.

NO. 7: REPLACE A MONSTER
It might be time to replace that energy-guzzling refrigerator or furnace. Just be careful! This could represent a slippery place where you slip and fall into debt because you eye a bigger, better model that far exceeds the amount of cash you can spend.

NO. 8: PUMP IT INTO YOUR CAR
You will get more years out of your car if you perform routine maintenance and keep it in tip top shape. Maybe now is the time to do some of those costlier items like servicing the transmission.

NO. 9: BUILD A STOCKPILE
Set this money aside to be used weekly at the grocery store to stock up on “Best Deals.” These are items on sale for which you have a coupon. They’ll be really cheap, so your refund will go a long way.

NO. 10: INVEST IN YOU
Perhaps it’s time to take a personal inventory of your health and well-being. What do you need? A trip to the dentist, a couple of hours with a good therapist, a day at the spa? If that renews your joy, it might be the best money you’ve ever spent.

In closing, I want to acknowledge, thank and even shed a tiny tear for all of the wondering notes and messages I receive from my readers. You have no idea how much your beautiful comments and messages of encouragement mean to me. I’m a one-woman show, which makes it impossible to respond personally. Just know that I read every one of them. So, keep ’em coming to keep me going!

Mary Hunt
Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, “Ask Mary.” This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book “Debt-Proof Living.” COPYRIGHT 2022 CREATORS.COM
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