Saturday, April 27, 2013

The Best Ways To Use A Tax Refund

Many people consider their tax refunds gifts but these are really remittances of money earned through hard work. This is not “extra” money or a payment that fell from the sky, it is money that the filers worked to accumulate. Understanding what a tax refund really is can make it easier to decide what to do with it. Before reading any further, be aware that the correct answer is not going on a shopping spree or taking a lavish vacation.

Time magazine reports that three of every four Americans receive income tax refunds and these payments average approximately $3,000. Many people view their tax refunds as financial relief far more consider the payments as an excuse to spend. This mentality has yielded very unfortunate outcomes throughout society.

Societal norms give us permission to do whatever we want whenever we want to do it simply because we can. We are not required to consider our financial future whenever we make a decision regarding money. Unfortunately, this leads many people to exchange their financial freedom for a life characterized by material possessions, debt, and other forms of financial servitude.

It is easy to want to accumulate more until we find ourselves buried by our debts. Even people who are under huge financial pressure may be more worried about their possessions than they are about their financial futures. Each of us should avoid falling into this trap and instead focus on creating financial success for others around us and ourselves. One way to do this is to use our tax refunds in positive ways rather than letting them burn holes in our pockets.

A strong set of financial goals serves as a guideline for handling a large amount of money such as a tax refund. Refer to these goals when determining how to spend the money. If debt has become an issue and a goal is to become debt-free, use the refund to pay off credit card, loan, or other balances. Individuals with investment goals should place the money where it will earn a respectable rate of interest.

Advertisements and articles offer “advice” about how to spend tax refunds but are often nothing more than marketing tools. Resist the temptation to make a down payment on a new car, pool, or boat because this will place you into unnecessary debt. If debt is not currently an issue, do not make it one. When attractive investment options do not exist, donate the money to charity or another worthy cause. Giving is known to have positive consequences not only for the recipient but also for the giver.

Another way to reinvest the money in yourself and others is to use it to establish a work at home business that offers the public something it needs and provides friends, family members, and acquaintances with an opportunity to come onboard. Avoid the urge to splurge and use the tax refund in a beneficial way this year. For those who make the right choice, the results will be impressive and long-lasting.

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