Here’s how I break things down
Here is a quick breakdown to how much I received this year and what I plan to do with it all. Keep in mind this will vary 100% on your own personal situation so take this more as an example for how I manage my tax return.
Total tax return: $1429
Pay off credit card – $300
New tires – $859
Extra payment to student loans – $150
Stock market – $70
Spending money – $50
I broke mine down this way (like I do every year) so that I can easily manage where my money is going and what it’s being spent on. I don’t know about you but I have the hardest time managing big influxes of money like tax returns or bonuses that come unexpectedly. By writing it out and breaking down my expenditures, I can more efficiently manage the extra cash. I highly recommend you do the same.
If you didn’t notice, a huge portion of my return this year is going toward new tires. Unfortunately, I have the pleasure of driving on some pretty rough roads every day for work. After a while the roads take their toll on your vehicle and so I am choosing to fix that problem with my tax return money. Normally, I would take that big chunk and apply it to my debt avalanche (the method I choose to pay off my debt) but this year, a to-do-list item took precedent. I like to think of my tax return as an annual bonus. As much as I’d love for it to help tackle debt, if it can’t, then I don’t worry. Sometimes their are more urgent items that need to be taken care of (like new tires). At the end of the week, I still have my normal pay check to work my debt down with.
What should YOU do?
Great question, except I don’t have that answer for you. What you do with your tax return is entirely up to you. However, I would recommend knocking out any “to-do-list” items that you need to. In my example, tires were a necessary evil and even though it pains me to spend a majority of my return on that, it had to be done. If you have nothing that requires immediate attention, your next best bet would be to pay off some debt. Whether you’re using the debt snowball or the debt avalanche will change how you apply the money to your debt, but knocking so if it out is always the ideal option. If it was up to me, I’d spend most of not all of mine on my student loans. That’s a headache for another post though.