How To Spend Your Tax Refund
Pay Credit Cards
By making an extra payment or paying more than usual, you can reduce the balance on credit cards. Reducing your balance will also help you save money on interest charges.
Open a Savings Account
You can use your refund to open a savings account, unless you already have one. By putting your refund in a savings account you can save for the future, like buying a house or a car, while generating interest on your money. Interest is money you receive from saving it in an account.
Also, putting your refund in a savings account is an excellent way of setting aside money for emergency situations. Most financial experts recommend that you keep at least 6 months of your monthly income set aside for emergencies.
Add To Your Retirement
You can use your refund to open an Individual Retirement Account (IRA). If you already have an IRA use your refund toward your annual contribution. Most IRA contributions can be used as a tax deduction.
If you have a 401k, using the money from your refund can be another smart way of adding to your retirement, especially if your employer matches your investment.
Invest In Stocks
Investing in stocks can start with as little as a few hundred dollars. Although there is a gamble involved, a majority of stocks often produce a nice return and can provide an excellent way of building your personal wealth.
Refinance Your Home
With currently low interest rates, you can put your refund toward the closing cost to refinance your home. Money from a refund may not cover the entire cost to refinance, but it covers a good portion of the cost.
Not only does refinancing allow you to take advantage of a lower rate, many homeowners are refinancing to change their type of loan. Homeowners with adjustable-rate mortgages are switching to fixed rates or changing their 30-year fixed rate into a 15-year deal.
Fix Your Home
You can use your refund to finally take care of those home improvements you have been meaning to get around to. By using your refund for home improvements, you not only improve the look of your home, but also increase the value.
Buy Health Insurance
Your refund can be a good excuse to finally buy some health insurance. Health insurance can help alleviate any financial burdens that may fall upon your family should anything suddenly happen to you.
Fix Your Car
Most people neglect to properly maintain their vehicles because of the high costs of labor and parts. You can use your refund to pay for any repairs or service needs, such as new tires or a tune-up. A well maintained car with properly inflated tires will also save you on gas money.
Dental and Health Checkups
Most people put off health and dental checkups because the cost of high premiums and treatment. You can use your refund to take care of dental work or health costs.
Taxpayers with a Health Savings Account (HSA) can use their refund to add money into the account. A HSA is a medical savings account used to pay for qualified medical expenses at any time without federal tax liability.
Buy To Save
You can also use your refund to buy items that may save you money in the end. This can include a deep freezer that will save you on food cost or new insulated windows around your home to help save on heating costs.
Invest In Your Future
Refunds can provide a great opportunity to invest in your career. If you have a home business, you can use your refund to buy new software or equipment that will improve your business. You can also use your refund to go back to school, to pursue your career goals or study for an advanced degree.
Invest In Your Child’s Future
If you have children who are planning on going to college, you can use your refund to start or add to a college fund.
If your child is already in college, you can use your refund to pay for tuition and other school expenses. If your child has a school loan, you can also use the refund to help pay off the loan.
Donate To Charity
For some, refund money is merely extra money. If this is the case, you may consider sharing the wealth by donating a portion of your refund to a charitable organization or relief fund. By donating some or all of your refund, you can ensure your money was put to good use. You can also use your donation contribution as a tax deduction.