I got a big income tax refund last year. Well, I would have, if I hadn’t applied it toward the quarterly taxes I pay as a freelancer.
What are you going to do with your refund, if any? My MSN Money colleague, Liz Pulliam Weston, suggests spending 10 percent of any windfall on something non-essential. But don’t let the rest of the money trickle away.
I’m not going to address the idea that tax refunds are of the devil, i.e., that you gave the government an interest-free loan all year. It’s not optimal, I agree. But for some people – like those who don’t yet have the discipline to save – a tax refund makes sense. (In my case it doesn’t. It just means I overpaid. Working on that.)
Instead, I’m going to address some useful ways to spend the money:
Pay down your credit card balance. After you’ve given yourself that 10 percent treat, throw whatever is left at your consumer debt. If it’s a large balance, you may not feel that you’re making much difference but you are.
Seed money for your emergency fund. Again, even a smallish refund is a start. Once you’ve got an account seeded, you’d be surprised how exciting it can be to add to it, even if (especially if) you are living paycheck to paycheck.
Build your own personal food bank. Fill your larder with dry beans, tuna, canned tomatoes, pasta, sugar, flour, oatmeal, and the like. A well-stocked pantry means less temptation to order in – and if there’s a financial crisis such as illness or layoff, you’ll have plenty to eat. You earn extra frugal points if you buy some of this stuff on sale with coupons.
Retirement savings. Don’t have a plan where you work? Let your tax refund be the beginnings of a more secure old age. Research this on your own or meet with a professional. Just do it. This year. Please.
Toward a healthier you
Visit the dentist. Start watching now for new-patient specials, which usually include X-rays, or even for social commerce deals through Groupon, et al. I’ve seen deals for X-rays, an exam, a cleaning, and a teeth-whitening kit for $29. And no, that’s not a typo.
Visit the optometrist. How old are those glasses, anyway? Look for deals through social media (see above) or in the Sunday coupon inserts for discount vision centers.
See a doctor. When was your last physical? It may have been quite some time ago, if you don’t have health insurance. Look for a community or public health clinic, where you’ll pay based on your income – and with a tax refund, you’ll be able to pay cash. Remember, there are “silent” ailments that can do major damage. Get yourself checked out.
A year’s worth of savings
Prepay your car insurance. See if there’s a discount for paying 12 months at a time rather than twice a year or, heaven forbid, monthly.
Warehouse club membership. A dedicated couponer can beat Costco’s or Sam’s prices on many staples. If you’re not a clipper, a warehouse club might be the place for you. Better to buy a crate of toilet paper at a fixed price than to pay more if TP isn’t on sale the week you run out. At the basic level, memberships don’t usually cost very much.
Transit pass. If I commuted by bus in Seattle I’d pay $2.25 to $2.50 each way, or $22.50 to $35 a week. A monthly pass costs $81 to $90, and I’d get to use it evenings and weekends, too. See if you can get a monthly pass where you live.
Buy discounted gift cards. Do you purchase cat litter at PetSmart or Petco? Get your hair cut at Regis? Outfit your kids via Kohls clearances? Stretch your dollars even further by paying with gift cards obtained on the secondary market. You’ll see discounts of anywhere from 5 to 20 percent (or more) on a ton of everyday items as well as treats like movie theaters and restaurants.
Home improvement. Not granite countertops or new cabinetry, but something that will impact the bottom line. Examples: New windows to replace some of the heat-leaking old ones, an energy-efficient fridge, the down payment on a new furnace or whole-house fan system. Cheaper fixes: A low-flow showerhead, faucet aerators, compact fluorescent bulbs, or weatherstripping. You earn extra frugal points if you invest in a home-improvement item that generates a tax credit for next year.
Supermarket gift cards. At least one chain was willing to tack on an additional 10 percent when I bought a $300 gift card. Does your store do this? Having the card with you will let you take advantage of manager’s specials or bonanzas in the dented-can bin.
Pamper your wheels. If you change your own oil, get a case of your car’s preferred brand (look for loss leaders at auto centers) and the filters to match. Stash replacement wiper blades, some windshield fluid, and any other odds and ends you might need this year. Check your tires – if they’re looking worn, start watching for sales. (The best price might be at the warehouse club you just joined.)