6 ways to make the most of your tax refund
You’ve finally received your tax refund! While it’s exciting to have some extra cash, it can be tempting to spend it on whatever, whenever—after all, it does seem like free money. However, it’s crucial you use your refund wisely, rather than spending it on frivolous things. Here are some ways you can make the most of your tax refund:
Pay off existing debt
It sounds obvious, but if you have student loan or credit card debt, use your refund to help pay it off. It might not sound fun, but putting money towards paying your debt gets you closer to financial freedom. Interest rates can snowball and make payments seem overwhelming, so any amount you put forward helps. Start by paying off debts with the highest interest, and then trickle down from there. Later on, once you’ve finally eliminated your debt, you’ll be thankful you were responsible and used that refund.
Save it for emergencies
Again, another obvious choice—save your refund! According to CNBC, 30% of households have less than $1,000 saved. That isn’t nearly enough to cover your costs if you were to have an emergency like your car breaking down or any unexpected medical bills. Ideally, you should have three to six months’ worth of living expenses saved. Open a savings account if you don’t have one already, and save your refund. Even if you can’t put away that much, use a portion of your refund—just a little is better than none.
Start home improvements
Have you been dying to give your home some much-needed improvements but had to put your funds elsewhere? Well, now that you have your tax refund, you can start your home renovation plans now! There are dozens of projects you can do for under $1,000—from painting to landscaping, those little improvements can all help your home drastically. Not only will it make you happier, but it will also add value to your home.
Use towards big purchases
Does your child need braces, or are you looking to buy a new car? Maybe even a home? Your tax refund is perfect for offsetting those costs. Use it to save for a down payment on a car or house. Every little bit helps when it comes to these purchases, so make your refund count where it should. Open a high-yield savings account, like a money market savings account, so you can earn the most from your money.
Donate to charity
Earn some good karma—donate part of your refund to charity. It feels nice to give back to the community, and using part of your refund to help your favorite organization is the perfect way to do so. Be sure to save your receipts, too, so you can write off the donation on your taxes next year.
Lastly, if you’ve done all of these things, help yourself! We all need self-care sometimes. Go on the trip of your dreams, or simply treat yourself to a new wardrobe—either way, don’t forget about making sure the most important thing is taken care of: you!