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Put Your Tax Refund to Good Use

February 24, 2020

Are you expecting a tax refund this year? Give the money a purpose and spend it wisely; here are a few financial priorities you may want to consider.

 

Spend Your Money Wisely

  • Start or increase your emergency fund. Without an emergency fund, just one surprise expense can send you on a debt spiral towards financial disaster. Many experts advise that an emergency fund should contain about six to eight months' worth of savings in an easily accessible interest-bearing account.
  • Pay off high-interest debt. After establishing an emergency fund, reduce or eliminate any high-interest debt you're carrying. Put your refund to work by starting your debt elimination program of choice, paying off payday loans, title loans, debt consolidation loans, high-interest private student loans, car loans, or credit card debt.
  • Spend it on something you need. Are you having car trouble? Do you need a new winter coat? Have you put off important dental work? Consider making these essentials a priority.
  • Start itemized savings accounts. Now is the time to start practicing the mindset of the disciplined and frugal consumer. First, make a budget and break your refund into pieces - each of which plants a seed in your bank account for important future purchases.
  • Refinance your mortgage or make home improvements. When you refinance your mortgage, you must still pay closing costs and fees. Use the refund to pay for the closing costs, and you can save thousands of dollars per year on mortgage interest. If you’re happy with your mortgage rate, take a look around the house. Do you need a new roof? Is your kitchen outdated? Could new energy-efficient appliances lower your utility bills? Home improvement projects can immediately increase the value of your property while simultaneously making your home more comfortable.
  • Donate to charitable causes. On a tight budget, making charitable donations can unfortunately slip down on your list of priorities. Your refund gives you a chance to give a little back!
  • Start a business. Have you been looking for seed money to take your business to the next level? Do you have a venture that you want to start? You can use your refund to move in the right direction. It’s a great opportunity to turn your refund into income for years to come, and get a few more small business tax deductions next year as well.
  • Treat yourself. You've saved all year, and now you’ve earned the right to splurge a little bit. Don’t feel guilty about using the extra cash for a summer vacation or to treat your family to a nice dinner. Just don’t get carried away – a $500 refund is no excuse for a $3,000 trip.

Source: MoneyCrashers

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