Millions of taxpayers receive tax refunds each year and have to consider ways to use the extra cash. Impulsive purchases make money disappear as quickly as it hits your bank account. Before you fill up your cart, you might consider how that money could enhance your financial security in the long run. We’ve listed some of the wisest ways you could use your tax refund in this article.
What should I do with my tax refund?
You’re the expert on your financial priorities and goals, so the answer to this question depends on your situation. Here’s a list of common ways people use their tax refund money to potentially inspire your next move.
1. Pay off debt
Use your tax refund to put a dent in your debt. Start by paying off your high-interest loans. It can be a long process, so it’s vital to figure out your most efficient course of action to save you as much time and money as possible.
2. Save for retirement
Saving for retirement is challenging when you need your income for expenses in the present. It is highly recommended to put your tax refund toward retirement savings if you are able.
3. Boost other funds
That college fund and emergency fund are important, too! Like retirement, college costs and emergency expenses may not be an issue right now, but they can hit hard in the future if you’re not prepared.
4. Start a business
Have you been dreaming of opening your own business? Or even simply turning your passion into a side hustle? Instead of getting a loan, invest your tax refund to start your own small business. Not only will this help you to fuel your dreams, but it can also be a great investment for the future.
5. Work on a fixer-upper
Home improvements will make your home more enjoyable, increase its value, and reduce taxes when it’s sold. Make sure you invest in capital improvements, such as building a deck, installing a hot water heater, putting in a swimming pool, or building an addition – anything that adds value or lengthens the useful life of a home. Remember to keep track of improvement costs. They will come in handy when it’s time to sell.
6. Pay for necessities
If you’re living on a budget, it’s easy to let important expenses get pushed to the side – like the car trouble you keep avoiding or that dental work you were supposed to get a year ago. Use your tax refund to cover these costs so they don’t continue to pose problems that endure. It may even improve your quality of life.
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