For those of you who generally owe taxes every year and complain, don’t take it for granted. Lower-income individuals like me find you in a more desirable tax bracket…unless you’d rather trade places, of course!
Besides, with a deadline filing date of April 15, 2015 and several weeks of processing time for the optional payment plan request, half the year has gone by before an installment may be due.
However, if you’re a low-income earner and you’re getting a big tax refund, I advise these investment options.
I know Clark wouldn’t consider some of these “investments” — nor does he even like you getting a tax refund — but the reality is that millions of Americans do get a refund and look forward to it every year!
4 smart ways to use your tax refund check
1. Reduce shelter costs
Yes, it’s easier said than done, but not impossible. If you’re fortunate enough to receive the maximum refund and/or have live-in family members or a significant other who also receives a significant return, consider purchasing a home outright in cash.
There are plenty of attention-starved starter homes available for just tens of thousands dollars, especially in metro areas throughout the South. Ask any agent or research on sites such as Zillow.com or HudHomeStore.com. Overcome the prejudicial fear of failure and live rent free! (For more on this, see my Amazon e-book How To Buy a House on Minimum Wage…it’s free through Feb. 7!)
Older mobile homes are generally affordable as well. Use one tax refund to purchase a mobile-home-zone-approved parcel of land complete with utilities, the next refund for the mobile home itself and transitional installation, and then customize and renovate over time.
Finally, you could also consider paying several months of rent upfront. A $6,000 tax refund can pay 8 months of a $600 rent, leaving $1,200 for wiggle room.
2. Upgrade your off-season clothing
If you’d rather buy a beautiful Gucci handbag than pay up your rent or buy a house, that’s fine. Your life, your priorities. Otherwise, nationwide shopping malls and plazas are currently price-reducing winter inventory to get ready for spring. Rack up on great deals now! A good clothing budget to follow, if it’s affordable for you, is 3% of all annual income times the number of household members. For example, a full-time minimum wage employee ($15,000/yr) and single parent of 2 who receives a $6,000 tax refund might spend approximately $2,000 per year on clothing, most of which will probably come from the tax refund. Budget accordingly.
3. Buy a cash car
For many individuals, life is simpler with a personal vehicle. Every year I observe friends and family flying off the lot with a new ride and posting it on social media, only to have it repossessed a few months later for non-payment, thus damaging credit — and making them have to ask me for favors to chauffer them around. Yes, a new vehicle looks and sounds nice; but if you’re struggling to pay bills now without a car note, then you’ll probably struggle even more with it. Seek life improvement and consider a “cash car.” New car dealerships will still be around when you’re ready.
4. Reduce your debt
Consider paying off delinquent debts, after other priorities have been acknowledged. Delinquent debts remain on personal credit reports from 7 to 10 years. So depending on your personal debt and goals, it may be wiser to pay off the younger debts first, as the older debts will soon “drop off.” Obtain a free copy of your credit report by visiting AnnualCreditReport.com and speak with a credit counselor if necessary so you can get to a position where one day you can honor all prior debts.
I once read somewhere that a college education is the key out of poverty and into homeownership. I believe education in general, no matter which form, is the way. I educated myself in real estate, so now I’m a homeowner and single mom who doesn’t have a college degree…yet!
As for me, my expected tax refund will be used on home improvements and debt, as I hope to sell my home this year as well. Maybe next year, we’ll all be rich enough to owe taxes. Good luck to you all!
About the author: Jennifer Kindle is the author of How To Buy a House on Minimum Wage, an Amazon ebook. She is a low-income single mom who refuses to let poverty win.
