Great things to spend your tax return on
Are you anticipating a big tax refund this year? Don’t blow it on stuff you don’t need or squander it at the nearest big-box store. Instead, use the money to solidify your financial future and boost your economic portfolio. To do that, plan to invest your tax refund in one of seven ways.
Pay Off Debt
Unpaid credit cards, student loans and other consumer loans cost you hundreds of dollars in interest every month. Instead of lining a big bank’s coffers, pay off your debts and boost your bank account.
To realize the maximum impact of your tax refund, tackle the debt with the highest interest rate first. Even if you can’t repay it completely, you will see an instant savings every month.
Start an IRA
Money deposited into a retirement account is a wise investment for your tax refund. Consider opening a Roth IRA that grows interest-free, or contribute to your existing account. Be sure you follow IRS contribution limits that typically max contributions at $5,500 per year.
Begin an Emergency Fund
If you don’t have cash set aside for a rainy day, start an emergency fund. It covers unexpected expenses like repairing a roof leak or paying household bills if you can’t work for some reason.
Ideally, maintain three to six months of living expenses in your emergency fund and store it in a high-interest savings account or mutual fund. Pass on the ATM card, though, as you reduce the temptation to withdraw money for everyday expenses.
Repay Your Mortgage
Unless your mortgage is almost paid off, your tax refund probably won’t make much of a dent in it. However, every little bit helps.
Alternatively, use your refund to pay for the closing costs when you refinance your mortgage. With a lower interest rate, shorter repayment period or fixed rather than adjustable rate, you save money in the long run.
Complete Home Improvements
Your home is your castle, so fix it up and make it fit for royalty. Turn the basement into a family game room, update the bathrooms, build an addition or repair the landscaping. While these repairs make your home easier to live in and enjoy, they also increase your home’s value and your overall financial worth.
Improve Your Vehicle
Buying a new Ferrari may be out of the question, but you can improve the vehicle you currently drive. Pay for a tune up, oil change and new tires to make your vehicle run smoother and more efficiently. Then, spend less than $200 for a complete detail, which makes your ride look brand new.
Buy Something You Want
Your tax refund isn’t fun money you can use on anything you want. However, feel free to pamper yourself a little bit. Plan a weekend getaway with your spouse, go to the spa or buy a new computer. As long as you don’t spend more than the refund amount, these indulgences are a fun way to reduce stress and enjoy life.
Now that you have seven great ideas for spending your tax refund, take a few minutes to decide which ones you’ll implement. It’s not too early to plan how you’ll maximize your refund and improve your economic portfolio.
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