With a new year comes W2 forms, and it’s time to get a head start on your taxes. Waiting until the April deadline isn’t the best idea. In 2012, we should stray away from procrastination. So as soon as you get your W2 and all of your other forms, you should set up a meeting with your accountant, tax person, or get things ready for TurboTax or whatever other program you use. If you’re one of the lucky people who’s getting a tax return, you’ll be getting a windfall of money, which could be tempting to spend. Here are 6 ideas of what you should do with your tax return:
- Apply it towards your debt: 2012 is the year to eliminate debt, and a great way to drop your debt is to apply your tax return to it. Last year, I received around $1,000 back, and that is a nice chunk to pay off a credit card or personal loan. I know it may not be the most exciting thing to apply the money to, but think of how freeing it will feel. Because it’s a lump of money that doesn’t affect your other goals, this is the perfect opportunity to reduce or eliminate your debt.
- Pad your emergency fund: Do you have a goal to set up or increase your rainy day fund? Your tax return is a great way to bump it up. I set up my emergency fund using SmartyPig so that it would be difficult to access, and be fun to keep track of. You can use your emergency fund for a variety of situations, such as a move, a job loss, or a baby, any of which could happen this year.
- Plan a wedding: There are so many engagements that happened over the holidays, which means this will be a year of weddings to remember. You can have the large to-do with plated dinners, expensive dresses, and breath taking venues, or you can do like I did and plan a wedding for under $1,000. Either way, your tax return can pay for wedding expenses like favors, flowers, or entertainment.
- Donate to a cause: Can’t think of anything you want to do personally with your tax return? Donate it! There are so many non-profit organizations that could use your financial support to accomplish their goals this year as well. You don’t have to donate the entire check if you’re not comfortable, especially if you have such a sizable amount. Choose your favorite cause or organization and start the year off in a giving mood.
- Start a small business: Last year, the average tax return was $3,000, which is a wonderful amount. You can start a small business with this return. Obviously a brick-and-motar probably is going to be more expensive than $3,000, but you can start a home based or online business. Maybe you want to put yourself through real estate school, or pay a professional web designer to design an amazing website and logo. Your tax return can go a long way for your small business.
- Splurge: Let’s face it, we all go through financial fatigue, when you’re so tired of doing the responsible thing. You pay your bills, you save your money, and sometimes you just get really exhausted. So heck, why not, splurge your money! Get something you’ve been waiting on for a while. Take a much needed vacation. In the words of the JG Wentworth commercials, “it’s your money, use it when you need it!”
How do you plan on spending your tax return?
Briana Myricks is a 20 something freelance writer and blogger. Striving for financial independence as a newlywed, she blogs about young married life at 20 and Engaged.