It's been a while since I've written specifically about money. However with "Black Peoples' Christmas" season upon us, I thought it was finally time to follow up on Part One of "A Financial Plan for Black America" by posting several ways you (anybody really) can use their tax return to improve their financial situation for once and forever.
I heard a friend of mine call getting a large tax check the term "Black Peoples' Christmas" and the term never left me. I'm not trying to be offensive, but you have to admit it makes a catchier blog title than "blah, blah, blah... what to do with your tax return...blah, blah, blah." I'll leave that to the people at Motley Fool or CNBC or somebody. I like my title much better. Plus, that's part of how this social media/blogging thing works. You have to grab folks' eyes.
Anyway...back to my point...here are some things you can do with the money you get back that have nothing to do with flat screen televisions...
1. Save it. Just because you have it, doesn't mean you have to spend it. Not now. Maybe not ever. One thing to consider is setting all or part of it aside for a rainy day, a college fund, an emergency fund equal to 3-6 months of your expenses or whatever good use you've had a hard time working into your regular budget.
2. Pay down debt. If you have high interest rate credit accounts, use this as a time to pay down the debts by paying well beyond the minimum payment or erasing it altogether. By now you know that most amortization schedules are designed to enrich your creditor. If you're paying the minimum on a high interest rate credit card, you might never pay it off fully. They hide that in the small print. Don't believe me? Play around with a good loan calculator. You'll see that making minimum payments on fairly small amounts can have you paying three times the amount of the principal for decades. Just going a little bit about the minimum can cut years off your repayment plan.
3. Invest in repairing your credit. I talk a lot about how having a better credit score can do so much to improve your overall financial situation. You can borrow at much lower rates, purchase a home (perhaps for the first time!) and save tens of thousands of dollars over the course of just a few years just from having a better credit score. It might cost a little bit, but it's well worth every penny.
4. Play. There's nothing wrong with playing. However, why not set aside a small amount and plan it out in advance? For example, think about using 10% for just anything you want to do and don't put much discipline behind it. You'll get the thrill of doing something unplanned for yourself, but also the freedom of knowing you were wise with the 90% of it. That should bring a smile to your face.
5. Donate. Is there a cause close to your heart that could use a timely gift of your support? Do you know a family that could use some help? Even a basket of groceries could mean everything to a family living close to the line. Perhaps even be a blessing to your church? Nothing given with a good heart is ever wasted. Your sowing always comes back to you in multiples. Think about whether this is a good time to do a little something for someone else. You can make a small wave that ripples throughout eternity.
6. Complete a home improvement project or service your car. Either of these has lasting benefits. I always say that cars give you trouble at the wrong time ALWAYS! Here's a chance to get ahead of your most trusted family member, your vehicle. Tune it up. Change the oil. Get some new tires or get the brakes done. You know you'll have to do them all anyway and it's better than waiting until you're on the side of the road calling AAA to realize it. You can also do something to your home to increase its value and comfort. Paint. Insulate. Do that landscaping project you've been putting off. You'll be able to enjoy your refund for years and years to come.
7. Start a Business. Perhaps I've saved the best for last?! What's a better use of unexpected funds than investing them into something that will generate money in multiples for months, years or even decades? Again, you don't have to spend money just because you have it. Work on your business plan and then come back to it knowing you've got the seed money you need. This might be just the right time for you to do something special.
(By the way, getting a large refund IS NOT A GOOD THING!!! It means you've allowed the government to borrow your money interest-free over the course of the year. The goal should be to shrink your returns and save more money during the year.)
What else can you do with a tax refund check? USA Today says the average refund is about $3000. That's more than a little bit! Shoot me some ideas!! Be blessed!
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