After all the stress of filing your taxes in the first place, receiving a tax refund is fantastic. It feels like you just got a random gift of free money — even though it’s really just your own money that you’re getting back.
It can be tempting to hit the mall with all that new money in your bank account, but there are smart ways to spend your tax return. Before you go on a spending spree, take a look at these tax refund tips.
1. Pay Down Debt
If you have any high-interest debt like student loans, you should put at least some of your refund towards paying it down. You’ll thank yourself later when your principal is lowered.
You could also work towards paying off a car or put a little extra towards the mortgage if you own a house. Take a look at your financial situation and see where the best place is to spend that check.
2. Pay Off Credit Cards
Speaking of high-interest debt, do you have any credit card debt piling up?
If you took advantage of your credit limit over the past few months and now need a way to finish paying it off, plan to put some of your anticipated refunds towards your credit card bill. Since the interest rates on credit cards are usually so high, you should make it a priority to pay as much of your bill as possible.
3. Invest It
Don’t have any pressing debt you need to take care of? Excellent! Consider investing your tax refund instead so that your money can work for you.
No matter how much money you received back from the government, you can increase it by investing it wisely. Don’t worry if you’re not a stock expert — you can work with a financial advisor or download one of the apps that makes investing easy.
4. Build Up Your Retirement Fund
A different way to invest is to build up your retirement fund. The more you save now, the more it will grow over time. Even a small boost now could translate into thousands of dollars of savings down the road.
If you have a 401(k), put as much money as you can in it until you max it out. It’ll reduce your taxable income for next year, your employer might match the funds, and future you will thank you.
5. Put It In Savings
Finally, there’s nothing wrong with just sticking the money you’ve gotten back into a savings account. If you don’t have an emergency fund yet, this is a good way to start one.
That way, no matter what life throws at you — a flat tire, a family emergency, or home repairs — you’ll know that you already have the money saved away to take care of it.
Put These Tax Refund Tips to Good Use
We hope that these tax refund tips help you decide the best way to spend that check you got! Put this advice and way more to use when you take advantage of our library of resources.
Learn more personal finance tips right here.