The Bright Side of Tax Season – Seven Ideas For What to Do With Your 2007 Tax Refund

As the deadline for completing 2007 tax returns approaches, more and more people are filing returns each and every day. While many people are filing the old fashion way through the mail, others are taking advantage of the free IRS efile method online. Once the headaches of making sure all your information is accurate and all your paperwork has been submitted, you should know in advance if you can expect a tax refund this year.

As with any income, it’s a good idea to think about what you’re going to do in advance and make a plan for how you will use it. We always quote the saying that “no plan is a plan to fail,” and it seems true that many of the worst financial decisions are those made compulsively. Since tax refunds are getting turned around more quickly than ever these days, take the time in between when you file and when you receive your refund to really think about what you’ll do with the money you get back.

Here are seven ideas we at 22Dollars brainstormed to help get the wheels turning when it comes to your 2007 tax refund:

* Deposit it in your savings account to help you meet your savings goals
* Spend it on something you’ve needed to buy for a while and that will help save you money in the long run – like a fuel efficient car for example
* Invest it in your retirement fund or in stocks you’ve researched
* Pay it toward debts you have such as school loans or credit card debt to help yourself avoid spending additional money on interest payments
* Donate it to a cause that’s important to you
* Budget it for expenses you know you’ll have throughout the year
* Use it to buy assets that will grow and make you money in the future

Remember that your tax refund is just that – a refund. It’s not free money, but in simple terms it’s getting back the extra money you already paid into the system. As a result you should think carefully about what you do with it. All of these options are not a good fit for everyone, but if you plan wisely you may be able to put your refund toward something that will give you a jumpstart in 2008.

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3 Comments - Post your comment below.

Kathryn
Mar. 10, 2008

These are great ideas for people who are going to be getting money back this year. I'm particularly fond of the idea of using the money to pay off - or pay down - credit card debt. That's the first thing I do with any extra money that comes my way! Unfortunately, there's a big problem for many people with actually owing money at tax time. It's great if you overpay and get money back but that's not always the case.

Katherine
Mar. 19, 2008

That's a very good point Kathryn! Definitely sounds like a good idea for a future post.

Johnny Smoke
Mar. 22, 2008

First timer to the site - thought I'd comment that having to pay the IRS is better than letting them hang on to your money interest free. I pay every year and I'm ok with this. The trick however is discipline. You have to be able to set aside enough from each pay period to pay the taxes so that you're not scrambling at the last minute. If you have this sort of focus, I suggest adjusting your W2 so that you either owe a little or at the very least, you're getting a very small refund. My 02.