It’s tax time and hopefully you’ve gotten your taxes filed. With any luck, you’ll soon be receiving your refund from Uncle Sam. Once you’ve received it, you’re probably wondering what is the best way to use your tax refund.
While it’s always tempting to splurge on a big ticket purchase, it’s a good idea to remember that there are smart ways to put your refund to good use, especially if you’re dealing with debt and credit issues.
To get you started, here are seven smart ways to use your tax refund.
1. Pay Down Your Debt
Paying off existing debt is one of the smartest things you can do with your tax refund. Not only are you reducing the principal, but you’re also reducing the future interest. Also, there’s something especially satisfying if you can apply your refund to eliminating the total balance to one or more credit cards. Whatever you do, make sure that once the balance is paid that you’ve taken steps to ensure that it doesn’t creep back up again.
2. Create a Cushion
One of the best ways to use your refund is not to use it at all. Instead, put it into savings or use it to start or supplement an emergency fund. Having money available in case of emergency provides peace of mind, it also makes it easier to avoid falling further into credit card debt.
3. Invest in the Future
Another great way to use your refund is to put it toward your future needs. Use it to:
- Pay the down the balance on your mortgage.
- Start or supplement your retirement account.
- Add it to your child’s college fund.
Whatever you choose, make sure you invest in the way that gets the most value for your investment.
4. Improve Your Home
Another great way to use your refund is reinvesting it in your home. Maybe you need to upgrade to energy efficient appliances, or a make a few modest repairs and upgrades. Use this money wisely and this investment can improve the value of your home, lower your energy bills, and increase your own enjoyment of your home.
5. Educate Yourself
Looking to improve your employment prospects, or get the training you need to move up the career ladder? Investing in your ability to earn more in the future, and grow in your career is another smart way to use your return.
6. Pay it Forward
If your tax refund is an unexpected windfall, there’s nothing wrong with donating it to others. Make a donation to the charity of your choice, or use it to make a special gift to your house of worship, community center or local organization of your choosing. Not only do you get the joy of giving, but you also earn a tax credit.
7. Splurge… A Little
Feel like you deserve to splurge a little with your tax return? That’s fine. Just be smart about it. Set aside a small percentage (no more than 10 percent) of your return to spend on that luxury item you’ve had your eye on. If that doesn’t fall within your allotted 10 percent, consider a more affordable item, or put the money into savings
Looking for other ways to invest your tax return and improve your financial health? Our certified credit counselors can help. Schedule a free counseling session today or call us at 800-920-2262.