The IRS refunds billions of dollars each year to millions of people, and you might be one of those who are lucky enough to receive a cash injection you weren’t expecting.
It can be tempting to splurge on a vacation, a shopping spree, or an expensive dinner with friends, but why not let your sensible side step in and decide? Reach your financial goals and solve some of your money-related problems by using your tax refund in the following ways.
Put it into a Rainy-Day Fund
After completing your individual tax return and waiting patiently for your refund, you’ll be more than thrilled when it finally arrives. However, rather than spending it immediately, there can be value in tucking it away in a rainy-day fund.
The unfortunate reality is that over half of Americans aren’t able to cover an unexpected $1,000 bill. You can position yourself on the right side of the statistics if you choose not to spend your recently acquired funds.
Invest it
You might not know much about investing, but that doesn’t mean you can’t learn and start growing your early retirement fund. There are many different investment options to choose from, based on how much risk you’re willing to take and how much you’d like to invest. To give yourself an overview of the main avenues for investment, take a look at high-yield savings accounts, short-term corporate bond funds, U.S. Treasury securities, and index funds.
If you’re unsure where to begin, meeting with an investment expert might be worth your time as they’ll be able to guide you toward the safest and most suitable investment options for your unique situation.
Pay your Bills
If you have interest-accruing bills hanging over your head, it makes sense to take care of these while you have the money to do so. Many credit cards have high-interest rates, and the faster you pay them off, the less of your hard-earned money you have to hand over to credit card companies.
You might even like to split your money and pay a small amount off multiple bills, keeping creditors at bay and putting you in a better financial position overall.
Make House Improvements
If your tax refund was substantial and your home requires a few repairs, this can be a match made in heaven. Think about some of the most pressing problems you need to address, such as roof leaks, plumbing issues, or old wiring.
Putting your money toward such house improvements or repairs can not only give you peace of mind that those issues won’t get any worse, but it might even increase your property value.
Save it for Something Important
You don’t have to spend a tax refund straight away or even put it into a fund you can’t touch for anything other than an emergency. There’s no reason why you can’t put it into a savings account for something you’re working hard to earn.
For example, your refund might be the very top-up your account needs while you’re trying to save for a deposit to build your dream house. Generally, the more money you have in a high-yield savings account, the more interest you can accrue and put toward achieving your dreams.
Tax refunds can be exciting, especially if you never expected to receive anything. Before you visit your local mall to go on a shopping spree, however, it’s worth considering whether you can put your money to better use. Investments, savings, and paying your current bills might be more beneficial in the long run.
