5 Financially Savvy Ways to Spend Your Tax Refund
Tax season can be daunting. Did you remember to keep that receipt from your doctor’s appointment on January 1st of last year? Have you kept track of all of your work mileage that you can deduct? Sometimes it can be like pulling teeth to get all of your paperwork collected and file your taxes, but once they are completed, it does bring a sigh of relief. After you turn everything in by the filing deadline, there can even be a great part of tax season — learning that you are getting money back. The big question is, what should you actually do with your tax refund? Below are five ideas for how to make the most out of your extra green.
- Pay down debt: Whether you have outstanding student loans or are dealing with credit card debt, using your tax refund to pay down some of those balances is a valuable idea. The faster you reduce your debt, the less interest you have to pay overall. Plus, if you put a significant chunk of money towards a major loan, you could also look into refinancing that loan to get a lower interest rate or a lower monthly payment.
- Keep some funds for a rainy day getaway: Are you counting down the days to your next vacation? If so, then putting your refund in a savings account or vacation fund would be a great option for you. Having the money saved before you even prepare to leave will help you enjoy your trip and worry less about finances. If you aren't thinking about taking a vacation anytime soon, then you can still add your extra dough to a savings account — just make it your emergency fund, so that you can worry less about finances in the future.
- Save for a down payment: If you are thinking about buying a house, condo, or townhome in Arizona, then right now is a great time to get moving. However, saving for a down payment from your paychecks isn’t always easy, especially when your other bills have to come first. That’s why it might be worth it to use your tax refund to start a savings account specifically for a down payment. If you currently have one started, then adding to it never hurts. It’s money that you already paid throughout the year, so you won’t be missing it. Plus, it will be nice to know that you are contributing toward your goals.
- Upgrade your space: If you are already in your perfect place, then your refund can help you complete some minor upgrades to refresh your home. You can use the extra cash to renovate that bathroom you have always wanted to redo or to replace those decorations you have been meaning to refresh for years. Either way, putting your extra money towards making your place a little more “you” will pay off in the long run since you will be able to enjoy your home more.
- Plan for your future: Retirement is not always the first thing on people’s minds when they get a refund check, but it is a good option to consider. If you have a retirement fund such as a 401(k) or Roth IRA, then adding to it will help you prepare for the future. There are certain limits on contributions to retirement accounts, though, so be sure to look into your specific account’s options.
Figure out the best plan of action for you and your funds and take advantage of getting a little green this tax season. It is exciting to get a refund, and it doesn’t happen every year, so be sure to find a way to enjoy how you spend that money.