It’s tax season. For some, that means paying out money, but for many, that means getting a good chunk of change back. In fact, according to TIME, 75% of Americans receive tax refunds. Many financial advisors recommend that you change your tax withholding so you don’t get a return. But if your income isn’t that high and you have children, you may always get a tax refund.
People treat their tax refunds differently than other money they earn. While some use it to pay down debt, or to put into emergency savings, many use their tax refund to splurge. They see a tax return as free money and use it to buy things they’ve couldn’t afford, or to take a nice family vacation.
If you’re getting a tax refund this year and you’re itching to spend the money, why not consciously spend it on items that will save you money year after year? Then, you still have the pleasure of spending your money, but you’ll also be investing in your future because you’ll be reducing your monthly outflow, ultimately leaving more money in your pocket.
Consider these types of purchases:
Am Ooma Telo Device
Ooma is a VOIP operated phone system. Generally, the system runs between $175 and $225. True, that’s a large upfront purchase, but it will pay for itself in no time. You can choose to go with the no frills option of basic home phone service through Ooma, and you only pay tax of around $3 to $5 a month. Or, you can choose to have call waiting, caller ID and a few other services and pay roughly $15 to $18 a month.
Potential savings: If you’re paying $40 a month for your land line now, and you switch to basic Ooma at $4 a month, you’ll save $36 each and every month. Within six months, you will recoup the cost of your initial Ooma purchase. In the next 5 years, you’ll save over $2,000!
A Router
When you sign up for Internet at home, you also rent a router. Most people never give a renting a router a thought, but it can add up. We’re charged $7 a month to rent our router. You can find a router to buy for between $60 and $120. Let’s say you purchase a quality $85 one.
Potential savings: You’ll need a full year to recoup the cost of purchasing the router outright. After that, over the next 5 years, you’ll save $420!
A Wireless Antenna
Cable is expensive. As more people cut cable, those of us who keep the service seem to have to pay more and more. If you haven’t cut your dependency on cable, perhaps this tax return is the perfect time to do so. You can find a good antenna for $50 or $60. (We bought ours at Costco for $40 plus tax.) You may also want to subscribe to a service like Netflix instant streaming for $7.99 a month, so you can still see your favorite shows.
Potential Savings: If you’re paying $70 for cable a month, you’ll only need one month with an antenna to recoup the cost for the antenna and your monthly subscription to Netflix. Over the next five years, even with your monthly Netflix, you’ll save $3,720!
The Takeaway
These three purchases will cost you an average of $370 out of your tax refund. Yet, over five years, once you recoup the cost of the devices, you’ll save over $6,200! That means you’re shaving approximately $100 off your monthly bills. You’ll be saving this money each and every month for the next five years and probably much longer.
Think about it. What would you do with an extra $100 a month?
By investing your tax refund into ways to save money, you’ve stretched your initial $370 tax refund into a value worth thousands of dollars. Now that is a smart way to spend your tax refund!
What other things would you suggest people buy with their refund that will save them money over the next few years?
