Getting your tax return in the mail or seeing it finally hit your bank account is the best (if not the only good thing) about tax season. Spend it wisely.
Maintaining a healthy relationship with your money is important. That’s why strategically spending or saving your tax refund becomes crucial. Many people view their refund as money to spend on frivolous things, however, this is a perfect starting point for travel savings or taking a chunk out of your debt. Here are some of the best ways to use your tax return to make the smartest investments:
Pay Off Debt
Pay off your credit card with the highest interest rates first. It is always best to pay down your debt than to try and build unneeded savings. With that said, make sure you have emergency savings before paying off your debt.
Upgrade Your Car
Trade in your old car for a newer version. In order to get the most for your money, don’t buy a brand new car. Instead, purchase one that is a few years older. Also, be sure to weigh all the pros and cons of the car you intend to purchase. Don’t pick the first thing you see on the lot.
Plan a Vacation
No debt? Congratulations, statistics show you’re in the minority of American consumers! Plan a vacation and enjoy a break from the hectic everyday life. There are plenty of low-cost destinations available. Cruises are a great option with great deals and the option to travel the world.
Start a Tuition Fund for the Kids
Start a savings account for your kids’ college education. Start early so that you can help them start their own path with little or no debt once they graduate college. Talk with your financial provider about your options - many parents tend to make costly mistakes while maintaining the best intentions for their kids.
Create Investment Account
Visit with a financial advisor and start investing your money. If you find a compounding interest investment, you can grow your investment rapidly over the next ten to twenty years. It’s always good to start early.
Renovate your Home
Use your tax refund to upgrade your kitchen or make another home upgrade. Put your money to good use and invest in something that will benefit you in the future.
Set aside money for an “in case of an emergency” fund. If something happens with your job, a medical complication or another unexpected costs turn up, you should be able to coast for a couple of months without going to your credit card or line of credit.
Whatever you choose to do with your tax refund, make sure you analyze the pros and cons and make the best choice. Remember, your tax refund might seem like an opportunity to splurge, but making a smart decision and investing in something appropriate to your needs will allow you to splurge much more in the future.