This time of year is much anticipated for many, as it’s tax time. If you are like me, you spend weeks dreaming of paying off bills or adding to your savings account. I’m well aware that not everyone is like me though. My husband certainly isn’t. I’m always in the camp of being smart with your money and your tax refund is a great way to start. I’m well aware that the ultimate smart thing to do is adjust your withholdings so you don’t get a refund. Why let the government hold onto your money all year? I also know that it’s hard to determine what your withholdings should be from year to year when you figure in deployments and changes in spouse employment. Here are a few ways to make sure your tax refund works for you.
Pay Down Debt
The obvious right? If you have debt, you are paying interest every month and it’s costing you. We do our best to keep our debt down, but it has always varied depending on where we were stationed and if I was working. Pay off credit cards, loans, or any other debt. Even if you can just pay down a credit card, it will lower the minimum payment. Continue to pay what you had been paying and it will get paid off faster, saving you interest. Once you pay it off though, make sure it stays gone.
Add To Savings/Emergency Fund
This gets me almost as excited as paying off debt. Besides the obvious reasons, I really think military families need savings for PCSes and TDY trips. There have been many a TDY trip that has been funded out of our own pocket. PCSing also always comes with surprise expense, like when we had to pay $600 and something for our dog to get on the plane for the move to Okinawa. Sure, you can add it to your credit card, but it’s not always as easy to pay off and knowing it’s in savings is helpful. Same idea for buying cars when you come from OCONUS. Shipping cars is expensive, as is buying them!
You’re probably thinking you’ve got this covered. There’s already a deduction that goes towards the service members TSP. What about you the spouse? Do you have any thing for retirement? I don’t currently have a retirement plan at work, so I add money to my IRA every paycheck. Even when I didn’t work, I put money in there every month. It’s all about compound interest. The earlier your start, the better you are!
If you or your spouse have used the GI Bill already, have you thought about your kids? I don’t recommend funding their education if you have debt or if your retirement is lacking. They can take a loan out for school, but you can’t take one out for retirement. If it’s affordable though, start a plan for them. Put in $2,000 and at an average of a 7% return, there will be $2,830 in 5 years, $4,004 in 10 years, and $5,663 in 15 years. That’s with not adding anything else to it. Add some every year and in 15 years, that $2,000 a year becomes $58,918.
As much as I love seeing my debt go down and savings go up, we all need a splurge once in a while. If it’s been a rough year for your family, there’s been a deployment, a hard PCS for the kids, use some of that money on the family. Take a vacation, even if it’s just a long weekend somewhere. Take a trip with your spouse to get the good back in your marriage. If your spouse is overseas on an unaccompanied tour, go see them or figure a place you can meet for a vacation. The people in our life are the most important.