Life is all about balance. Even when times get difficult, it's still important to relax and have fun. For many taxpayers, a refund comes as a pleasant surprise that may elicit one of two reactions. If you're like many taxpayers, you probably do one of the following:
a) Hide your money in a bank account for a rainy day - just in case; or
b) Blow the entire check on something excessively luxurious.
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1. Have Fun - In Moderation
Embrace the fact that you're a human being and give yourself some flexibility. Sometimes, you just need to buy that completely impractical item, right? Instead of racking up credit card debt, plan in advance, spend in moderation and pace yourself. For those "gotta have it" moments, your "fun" budget will keep you covered. Think of it like an insurance policy.
2. Give to Others
November and December are the months that tend to hit bank accounts the hardest. This is because many people fail to plan ahead and anticipate the cost of holiday gifts. A gift fund will help you afford the best surprises for your friends and family - without leaving you with an unpleasant surprise on your credit card bill.
3. Take a Trip
You can't spend your entire life working, doing chores and running errands (although it might seem like it). At the same time, you shouldn't go into debt taking unrealistic and exotic trips. What you can do is give yourself some leeway to go somewhere, and let your tax refund help you reach your destination - whether it's a 40-minute drive or 4,000 mile flight away.
4. Fund Home Improvement
If you wait for something to break, you may end up spending extra money to get it fixed quickly. If your roof, furnace or refrigerator is nearing the end of its life, save your tax refund to replace it - and consider shopping for the best price before-hand to avoid getting taken advantage of when you're in a panic.
5. Save for School
If you have kids you are probably already (painfully) aware that college can cost up to $50,000 a year. With that kind of number to hit, it really isn't too early to start saving. In the world of education, the smallest amount of money can go a long way; if you stash your tax refund away while your kids are still in diapers, it'll have time to earn interest and grow right along with them.
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6. Donate to Charity.
If you're lucky enough to feel financially stable, consider using your tax refund for a charitable contribution. But instead of blindly writing a check, take some time to research your organization of choice. Get your family involved, and use this donation as a learning and bonding opportunity. If you're lucky, you may even get to deduct your donation from your taxes next year.
7. Buy a (Cost Saving) Gadget
Your favorite gadgets can actually help you save money. For instance, you can use your digital camera to take photos for holiday cards and gifts, while an iPad or tablet can allow you cancel expensive magazine subscriptions. This is one way to creatively balance your budget and still have fun.
The Bottom Line
When it comes to your tax refund, think creatively and strategically to find a way to use that money to balance both your checkbook and your life. From a return on investment perspective, "fun" budgets are practical, valuable and important. Plus, your tax refund can enable you to have fun, guilt-free.