If you haven't already received a tax return, it is very likely you will in the near future.
According to CNN Money, eight out of every 10 taxpayers receive a refund from the IRS, or 84 percent of individuals making less than $50,000 a year. The average amount most individuals receive is somewhere around $2,800.
That's a large amount of money for the average consumer to receive in the mail or through direct deposit. That refund can also go a long way toward achieving financial goals, such as saving for a home or padding the emergency savings account.
While there are financially responsible ways you should use the tax return, you should also consider some of the more fun options. After all, constantly saving your money sometimes means missing out on leisure activities in the present.
The trick, however, is how you go about balancing the two once you see that return come in the mail.
Pay off existing debt
First on your radar should be the elimination of any existing debt you might have. Circumstances will differ, but don't hesitate to pay off a credit card if you can cover it with part of your return.
Even if you have a high amount of debt, knocking $500 or $1,000 from your balance can make a huge difference. Doing so will bring you that much closer toward financial breathing room. If you have multiple cards, start by paying off the ones with the highest interest rate.
From there, consider focusing your debt reduction plan on any student loans you might have to pay back, or bills that you were unable to pay in the past.
Upgrade your home
If you want to get the biggest bang for your buck, consider investing in home upgrades with your tax return. These can include remodeling work, new furniture or better yet, new appliances. Try to get new appliances that are energy efficient, whether they're dishwashers, laundry machines or refrigerators.
In fact, there are numerous tax credits and deductions for homeowners who remodel their house. Consider: installing solar panels or making other energy efficient upgrades. You can receive a federal tax credit of 30 percent that covers the price of the equipment, installation and labor.
The IRS states this 30 percent credit is for everything. For example, if you spend $10,000 turning your home into an energy efficient property, you will receive a $3,000 credit in addition to the money you save on your monthly utility bill.
Go on a vacation
Sometimes, you just need to get away from the monotony of life and experience something new. Going on a vacation to another part of the country or even overseas is a fun way to spend your refund.
You should ideally spend a refund check on a vacation if you have your finances already in order. When you do, the trip can be just what you need to relax and see part of the world you have dreamed of going to.
Don't hesitate to treat yourself after months and years of hard work. But if you do go on a trip, plan a budget and stick to it so you don't go into debt.
Plan for the future
A tax refund is a great source of money to plan for the future. You can invest it in your 401(k) or IRA retirement accounts, build up an emergency savings account or set it aside in a 529 plan to save for a child's future college tuition.
Additionally, a tax refund can go toward a down payment for your dream house. Ideally, you should save up 20 percent of a home's sticker price, but that amount will vary. Even so, your tax return will help you achieve your goal of buying a home and moving out of your current apartment.
"With any tax refund, you can use the money for both fun and responsible matters."
To borrow a phrase from the popular television show Parks and Recreation, sometimes you just need to treat yourself to the small things. Consider saving the tax refund for buying a new car, signing up for a gym membership or taking a cooking class.
You can even consider upgrading some of your current technology that may be showing its age. Tech such as computers and smartphones can become hampered by their age if they're over a few years old. Spend wisely though, as you want to make sure you buy a product that lasts for years.
Be careful, however, as you don't want to spend all of your money on electronics. You have to balance the tax refund by taking care of important needs with personal and more fun matters.
With any tax refund, you can use the money for both fun and responsible matters. It's up to you to plan accordingly, but don't be afraid to pad your savings account and pay off a credit card and use the leftover money to go on a vacation.
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