Tax refunds can arrive at a convenient time. Some people feel a financial strain right after the holidays. By March and April, some extra money can really help your financial situation. A tax refund can help you jumpstart your savings for the year or pay off some debt or other bills. However, there are quite a few dumb things people use their tax refunds on that won’t help their financial situation in the long run.
Buying Big T.V.s
Purchasing a new television with your refund may not be the best idea especially if it is more of a want than a need. Upgrading the things in your home should come after you’ve met your needs and paid all your bills and debt. If you don’t need a new television and it’s not on sale, it’s not a wise way to spend your extra money.
A Brand New Car
Cars depreciate in value so fast, so it’s questionable whether you should buy a brand new car at all since you could possibly lose money in the process. If you can’t afford a certain car, but have the opportunity to lease or finance one thanks to your tax refund, it’s best to avoid that situation.
If you finance a car that you can’t afford, what happens when you aren’t able to make a payment or afford car repairs and maintenance? Not paying on your loan on-time each month can devastate your credit score causing even more problems for you later down the line.
Gambling
Gambling is not a good way to spend your money period. Just like you could hit the jackpot, you could easily lose everything you have quickly as well. The odds of winning money from lottery tickets or being successful at the casino are quite slim. It’s not worth it to take that chance when you can invest your money and see an almost guaranteed return or use it in another way that improves your finances.
Loaning it Out
Saving and paying down debt should be number one when thinking about what to do with a tax return. Lending out money should not be to high on the list. In most cases, it’s important to take care of your finances first before you are in the position to help someone else out. If you don’t have the spare money to loan someone it’s always okay to say no.
Partying or Shopping
Yes, people actually do this. I once had a friend as me if I went shopping with my tax return money like it was something I was expected to do. When you receive a large lump sum of money that might not have been expected, it’s easy to start thinking of ways to splurge and treat yourself but the best thing you can do is stay strong and think logically.
It’s easy to shop and plan a fun vacation, but it’s harder to save each month for emergencies or just because. Using your tax refund for the harder task and saving up slowly for the funner task will increase your chances of being able to achieve both because you’ll be more motivated to save up for something that will bring you instant gratification. Set an entertainment and fun budget each month instead so you’ll be more inclined to spend your tax refund wisely if you receive one.
What are some other dumb ways to spend your tax refund?
Chonce is a freelance writer who’s obsessed with frugality and passionate about helping others increase their savings rate, eliminate debt, and work toward financial stability. She chronicles her journey to becoming debt-free on her blog, mydebtepiphany.com.
