Tax time can be a confusing time. There are many numbers, acronyms (we have so many of those in the military community), and those ever-important dates for filing. After the paperwork is gathered, numbers are entered, and the filing is done, the wait begins for the tax rebate to show up in the mail or bank accounts. What to do with the rebate once it arrives? It is tempting to splurge on something new and exciting. There are wise and useful ways to spend the rebate.
- Pay off orthodontic bills. While the military’s dental insurance does cover a little of orthodontic care, it does not cover it all. Especially as military families move across the country while a child, or yourself, is under orthodontic care, this leads to bills for care. Then there is a phase I and II of orthodontic treatment, and that can add up quickly. Use your rebate to pay for the remaining amount. If you pay the bill in full, ask if the orthodontist will provide a percentage off to cover this payment in full. It may not seem like a splurge, but using the rebate money is a splurge on a pretty smile!
- Pay off or put a payment toward a high-interest loan. Have a credit card debt? What about a high-interest car loan? Maybe you are paying off school debt. Use the rebate to pay it down or off. Interest adds up, especially when it is above 10%. Depending on the risk, most investments can earn 7-10%, so any interest rate higher than that is worth paying down faster. This allows your money to be yours at a quicker pace to have available to invest in the future if you desire.
- Put payment on the principal of your home payment. Putting a payment on the home mortgage will lower the principal amount and save some of that interest added to the larger principal amount. If you want to pay off your house sooner, consider adjusting the paycheck deduction, so you do not get a rebate at the end of tax season and instead receive the higher paycheck monthly and use that extra money to pay off the mortgage with bigger payments monthly.
- Invest in a Financial Planner. Some fee-for-service financial planners can help determine the best investments for your family. From a Simple IRA to a 529 or education savings accounts, financial advisors can guide types of financial accounts that best suit your family’s financial abilities.
- Boost Your Emergency Savings. Financial emergencies happen. The car engine stops working, you need to pay for an emergency dental bill, or the HVAC in your home stops working in the dead of winter. If you don’t already have an emergency fund, put aside your tax rebate for it. Set an attainable goal – be it $500 or $1000 and go up from there as you are able. The age-old saying is to have three months’ expenses as an emergency fund. If funding is less predictable, have a larger emergency fund.
- Build up your PCS fund. Moving is not cheap. While the government pays for the physical move of the household goods, and there is reimbursement for hotel stays when moving to the new location, there are still extra costs associated with replacing missing and broken items and pantry items. Put the tax rebate aside in an interest-bearing account ready to pay for the upcoming PCS costs.
- Build a Savings Goal. If you have paid off debt and built up an emergency fund, start saving for a savings goal. If you want to own a home, consider building up savings for payment on the principal of a home, even if you use the VA Loan for the purchase of a home. Are you looking to purchase a car in the future? Consider saving for that. Maybe your goal is to buy new furniture during your twilight tour that you don’t worry have to worry about the weight with. Or perhaps your family wants to buy a Recreational Vehicle in the future to explore after retirement, consider the rebate as a boost to saving towards it. Decide on a savings goal for yourself or your family, and put the tax rebate toward that.
- Consider purchasing life insurance. While in the military, SGLI provides wonderful life insurance coverage to the active duty member, but life insurance is not available after retirement. Life insurance provides coverage of funeral expenses and any living expenses needed for the family left behind.
- Invest in education. Whether it is education for yourself or your spouse, using the rebate to pay for college courses can be an investment that pays dividends later. Maybe you wanted to take photography courses or get a certificate in a computer program. These skills can help build business or skill levels to help with future employment. If you have been looking at going back to school, using your rebate may be a smart way to do it.
- Save it. While this sounds like the simplest of all of the above, if you already have the debt paid off and an emergency fund in a separate account, maybe all you need to do is save the amount. Let the interest in your savings or checking account grow a little more, and you will be ready for whatever you need when you need it.
