5 Things To Do With Your Tax Refund
After going through the grueling process of filling out online forms and calculating figures, it’s pretty exciting to finally receive your tax refund. You may consider spending it on concert tickets or the newest iPhone, but it doesn’t hurt to think a bit more strategically. Sometimes what your parents probably told you about being practical really is the best policy.
You can stash that refund away for a rainy day, or even make a smart investment for a bit of extra money. Here are five ways to make the best use of your yearly tax refund…
Increase Retirement Savings
Whether you already have a good amount saved up for retirement, or just want to make that first move toward financial security, this is a great use for your tax refund. It’s always an option to have your refund deposited directly into an IRA, as you’re not required to pay taxes on money you contribute, and you’ll feel a sense of accomplishment knowing that you’re setting yourself up for a better future.
Pay Off Your Car Or Credit Card
Anybody with a car payment or credit card debt knows the nightmare of high interest rates, and paying off the minimum balance each month may not be making the impact you need. The average tax refund these days is around $2,800 – enough to make a significant contribution to your outstanding balances. Choose your debt with the highest interest rate, and pay off as much as you can to give your bank account a break.
Get A Month Ahead On Your Mortgage
Your home is the special place where you’re supposed to feel safe, but that’s not always easy with U.S. housing costs getting higher and higher. If you find yourself stressed trying to make your mortgage or rent payments each month, consider using your tax refund to pay a month ahead. This gives you peace of mind, and assurance that you’ll be able to keep a roof over your head.
Expand Your Emergency Fund
Most of us know that it’s important to always have an emergency fund. Life is full of unexpected surprises – many of them unkind – and the last thing you need is to have zero savings after you’re unexpectedly injured or laid off from your job.
You can avoid going into debt by stashing a portion of your tax refund in a money market account. The amount to save depends on your personal needs and lifestyle, but $1,000 is always a good starting point.
Make A Student Loan Payment
You already know to pay off your high-interest bills first, but student loans are in a category of their own. Even if you still owe thousands from your time at university, using a portion of your tax refund to pay off your student loans brings you that much closer to being debt-free.