3 Ways to Jump Start Your Financial Goals this Tax Season

It’s that time of the year again – tax season! That dreaded time where you get together all your W-2s and 1099s and hope that you can find last year’s tax documents lying around somewhere.  I know it’s an annoying task, but getting your tax return can be one of the best ways to jump start your financial goals this year. Here are 3 ways to use it effectively!

  1. Build up your emergency fund

Building an emergency fund is one of the first things that Haley and I did on our path to financial freedom. This may seem obvious, but in order to become debt free, it was vital that we didn’t take on any new debt. By saving $1,000 it allowed us to have a cushion in our finances. If an emergency did arise, we could use this money instead of charging a credit card or getting a small loan. We would only use this for a real emergency, such as paying to have one of our cars fixed or paying for medical expenses. If we were to charge an expense like this, it would put us further in debt and inhibit our financial goals since we would have to pay interest on that. We have had our emergency fund established for a couple years now and have not had to touch it once! However, it does give us peace of mind in case something was to come up that we could still remain debt free.

  1. Pay off debt

If you are expecting to receive a decent chunk of money from your tax return, this can be a great opportunity to pay off some debt. If you have a few different loans or credit cards, I would suggest paying on the one with the highest interest rate. This way, you will be saving on interest every month, and you will be one step closer to freedom! The feeling you get when you pay off a loan or credit card is so rewarding and will continue to motivate you to keep making smart choices with your money.

  1. Pour it into your savings

Lastly, you can use your tax return to build up your savings. If you’re looking to save for an expense that is in the near future, like buying a house, you may just deposit your return into your bank. However, if you’re looking to save for something that may be a little farther in the future, you may consider investing your tax return.

These are just a few ideas regarding how to use your return to further your financial goals. It’s also good to use a small portion of your return to buy something for yourself! You’ve worked hard to earn your money, and rewarding yourself every once in a while can really help keep you motivated to stay on the right path and not get burnt out.

Thanks for reading this post! If you have any suggestions about what to do with tax returns, feel free to comment below!

-Josh Klaas

If you would like to read more about our story, click here.

Posted by Josh Klaas

2 comments

Mr. MFC @ Morning Fresh Cent

Good reminder to put some of your tax refund back into yourself and not spend it all on the next latest gadget or fashion trend.

Hi! Thanks for your comment! Agreed! Sometimes it’s hard to forego in the moment, but it’s always worth it. Have a nice day!