Well, tax season is firmly upon us, and depending on how much you procrastinated, you might already have that nice lump sum of money from Uncle Sam sitting in your bank account. It can be exciting to have that much money all at once, and extremely tempting to just blow it on fun stuff. However, that lump sum of money can actually do quite a bit of good.
Here are some ideas for frugal uses of your tax return:
1. Put it towards debt
Take that money and make it work towards getting out of debt faster. I recommend putting all of it towards one thing and see if you can either pay something off or get close. Every little bit counts, after all, and the faster you get it paid off the faster you can get out from under it.
2. Add it to your emergency fund
Everyone should have an emergency fund, and if you don’t this is a great time to start one. This amount should also be separate from your savings. As a general rule, you should have at least one month’s pay in the bank–two to three is preferable–just in case the unthinkable happens. You can never have too much of an emergency fund.
3. Save it
Put all or most of the money in a savings account and leave it there. The hardest part about saving is starting, so having something to get you started will be a great motivator. You could also invest it in a retirement fund, which is kind of another form of savings.
4. Build up your pantry
Stock up on things that will keep. Make sure it is only things you know you’ll need like pasta, beans, napkins or paper plates, canned goods, flour, etc. Just make sure that you’ve got room to store it all before you go to the store!
5. Prepay your bills
There are some bills, like car insurance, which you can prepay and then just not worry about. This is my personal favorite thing to do with tax money, and you’d be surprised how many bills will let you prepay ahead of time. It’ll be like having a little extra money each month all year long! You can also simply calculate what you’ll need and then set that money aside, although the temptation to dip into it might be too high so be cautious if you do this.
6. Do that thing you’ve been putting off
Need to go to the dentist? Get your car looked at? Replace something in the house? There are plenty of big expenses which we all tend to put off, especially when money is tight. Before you splurge on something you don’t need, take a look at the things you do need and see if you can spend the money on that instead. Trust me, it will make life easier in the long run.