6 Intelligent Ways to Spend Your Tax Refund
All of a sudden, your bank account gets a much needed boost and your balance looks dramatically better than it did just 24 hours before. There are so many possibilities for ways to spend your tax refund – some of these options may make you feel good (vacation, new electronics) but these may not always be the wisest choices for spending your tax return.
If you are looking for the most intelligent ways to spend your refund, see our list below:
1. Pay down credit card debt: Your credit cards carry very high interest rates and paying down some of these cards will help your entire financial outlook.
2. Emergency Fund: If your savings account is lower than you would like and the economic downturn has hit your family hard, consider putting some or all of your tax refund in your savings account. This emergency fund can help you avoid getting further into debt in the coming year should you encounter unexpected expenses.
3. Invest: You have heard this before… invest some of your tax return into your IRA or retirement fund. You will have a very high yield on this investment and your tax return will go a long way if invested in your own future.
4. Make one extra mortgage payment: This will decrease the principal on your home loan and decrease the overall number of months you pay your mortgage.
5. Make some home improvements: When money is tight, it is easy to overlook small problems that have surfaced in your home over the last few months. Consider tackling a few items on your home improvement list with some of your tax refund. This will improve the value of your home and also help to prevent a small problem from getting bigger and costing you a large sum of money.
6. Invest in yourself: Consider professional development opportunities that might help you in your current job/career. This may mean attending a conference, taking a class or hiring a coach or a therapist. You can examine what is going well in your job and do some career planning for the next several years.
Planning is key
The most important thing that you can do when you get a tax refund is to come up with a plan. Of course, you may want to spend a small amount on a luxury item and that is just fine. The key is balance and planning. You could decide for example that you spend 75% of your return on credit card bills or one of the other options listed above and the remaining 25% on a vacation or an iPad.
Success Tax Relief is a tax firm that specializes in all types of tax issues, including routine tax preparation and planning. We can help you get an idea of what your tax return will be, so that you can spend more time planning and less time worrying. Give us a call today at 1-877-958-6638 if you have questions or if you would like a free tax consultation.