It’s tax season. For many people, awaiting an income tax refund is the most exciting part. For those who are expecting a check, what’s even better is figuring out how to use this extra money.
No matter how much you receive in your state and/or income tax refund, simply having an extra few hundred dollars or more can measurably impact your financial plans. Take a moment to consider the savviest ways to make your refund work for you with the following options.
We’re bombarded with several hundred ads each day – and some of them are actually quite compelling. So it’s not surprising if you prefer to spend your tax refund on a deserved splurge. Just remember the new financial windfall you’ve received doesn’t mean you shouldn’t try to get a great deal on this big purchase.
Going big with spending your tax refund could be anything you wouldn’t normally do on your regular budget and income. If you don’t have any pressing financial obligations or goals and just want to treat yourself a little, consider putting your tax refund towards a downpayment for a home or car, a large appliance, a vacation, or something even more indulgent.
Go Home (and Save)
A recent survey by GOBankingRates revealed one of the most popular ways people use their tax refund is to stash it in a savings account. This is probably the savviest thing to do with your new refund.
You really can’t go wrong with saving any extra cash you get, especially since the average American doesn’t even have $1,000 in their savings accounts, yet receives more than twice as much in tax refunds! Just make sure you’re putting it in the savings account with the highest APY rate.
Make the World a Better Place
This one isn’t quite as popular as the others, but donating to your preferred nonprofit can certainly make a huge impact. If you’re looking to spend meaningfully instead of buying something you don’t really need, use some of that tax refund to support advancing a worthy cause. Besides, you can write it off on your next tax filing!
There are multiple channels of investing: in your personal life, education, career, home, community, real estate, stocks, retirement accounts, and many other ways. Why not make your tax refund money work for you by investing it?
Most Americans are woefully behind on saving for retirement. So, if you’re great at self-control and also want to boost your income in your later years, you won’t regret putting your tax refund towards the ultimate financial security goal: retirement.
If you’ve been eyeing a personal development, professional education, or home improvement project, this could finally be your chance to take it without putting a serious dent in your wallet. Investing in stocks, real estate, etc. can prove lucrative, too. Just make sure that your investments are well-diversified with a few showing more immediate payoffs.
If you have the dreaded debt monkey on your back, using some or all of your incoming tax refund towards paying it down could be your saving grace.
No, paying off debt isn’t much fun, but it is a much more liberating use of your money. Paying off debt with your refund (instead of spending it) will free up your future income to do all of the previously mentioned activities and then some. It’s a form of responsibility and delayed gratification that will lead to more enjoyable things and less financial anxiety.
Do any of these options appeal to you, or did you have something different in mind? In the same GOBankingRates survey, the largest percentage of respondents weren’t interested in any of the popular uses for income tax refund checks, so it’s not uncommon to think completely out of the box.
What is the wisest way you want to spend your upcoming return? Comment below with some unique ways you plan to spend your tax refund!