Getting a tax refund is always exciting, but it’s easy to get caught up in thinking about what we want to spend that money on rather than what we should put those funds into. No matter what you choose to do with your tax refund, make sure you consider all possibilities and think long-term about how this extra cash can benefit you now and down the road. With that in mind, here are four of the smartest ways to use your tax refund.
Invest in Education.
Use your tax refund to invest in yourself or another family member’s educational journey. Whether it be for school supplies, textbooks, or tuition fees, investing in education is one of the most valuable and impactful ways to use a tax refund. If you, or someone in your family has had college on their mind lately, now may be the time to take that next step. That extra tax refund money may just be what you needed to jumpstart your educational journey!
A higher education will help you or your family member gain knowledge, but it can also lead to increased wages, improved job prospects as well as provide skills needed to find success in their professional and personal lives. Investing in college now while you are able, will ultimately pay off in the end.
Pay off Debt.
Using your tax refund to pay off debt can be a great way to save money long-term. Paying off high-interest debts can be especially beneficial, as it will allow you to save substantial amounts of interest over time. Additionally, by paying down debts with extra funds, you can free up more money each month that would otherwise have gone toward servicing those debts.
Instead of spending this money on interest payments and other expenses associated with carrying debt, it can be put towards savings goals or other necessary purchases. Paying off existing debt with your tax money will allow you to make a dent in your overall financial obligations and start working toward a more stable financial future. For help knocking out debt, check out our Knock Out Debt and Get Rich, Bitch Course!
Start an Emergency Fund and Boost Your Retirement
An emergency fund is vital for any household budget and it can easily be established with a tax refund; even if it is only $200-$400 at the start, that small amount can go a long way when unexpected expenses arise. Having an emergency fund not only helps provide peace of mind during financial times of stress but may possibly prevent further debt from being taken on. An emergency fund can help you avoid debt and save money in the long run without having to rely on high-interest credit cards or loans. Now you can avoid late fees, interest payments, and repair costs due to delayed treatment. For example, if there is an appliance that needs repair but you don’t have the funds available in your monthly spend plan, you can use your emergency savings instead of taking out a loan for the purchase. This will not only save you money on interest but also help ensure that any costly surprise purchases don’t lead you off track.
If you already have an established emergency fund, consider boosting your retirement and getting a head start for the current year. You can use the funds to purchase or augment a Roth or traditional IRA, which hides your money away for when you’re no longer on the job. Keeping an eye on your retirement and adding extra cash with your tax refund can help support your long-term financial goals and can help you reach them faster. Be sure to check in with your CPA or tax preparer regarding your personal financial situation before making contributions to your retirement funds.
Purchase Durable Goods.
If you need items for your home that are expected to last for years such as furniture, appliances, tools, etc., using a tax refund could be a brilliant way to get them without breaking the bank at once. Many products nowadays come with energy-star ratings that measure their efficiency when it comes to electricity usage. This can save you money on your utility bills long term.
Additionally, many products come with additional features such as timers and remote controls that can help you optimize your usage and save even more energy over time. When you save energy, you save money! By making wise investments into quality items now that will last long-term, you may find yourself saving money in both the short and long run while improving your living space and overall lifestyle simultaneously!
When it comes to your tax refund, there are a variety of ways you can use the money wisely. Whether you choose to invest in yourself by paying off debt, putting money aside for emergencies, or purchasing a new home appliance, it is important to create a spend plan that best fits your financial needs before that refund check is gone. With careful planning and thoughtful consideration about how best to use your hard-earned money, you will be on the right track to owning your financial future.
Want to become more financially literate?
Remember, you need to KNOW your money to GROW your money, and the time to start learning is now! Check out our Money Coaching Online Courses to increase your financial literacy and own your financial future.