Tax season is synonymous with windfalls of cash leading to big purchases or impromptu vacations. But what should you really be spending this year’s refund on? Here are six better uses for your tax refund that you might want to consider before you checkout with that overloaded online shopping cart.
Establish Your Emergency Fund
If you don’t already have one, this is hands-down the number one thing you should do with your tax refund. You’ll eventually want to strive for three to six months’ worth of living expenses, but even just using a few hundred or thousand as a start is better than nothing. Too many adults don’t have the cash to cover unexpected expenses and having an emergency fund frees you of the stress that comes with life changes you didn’t see coming.
Pay Down Debt
The next best option is to use that cash to pay off outstanding debts, especially if you have high-interest debt. Lowering your debt now can relieve you of the financial stress that comes from crippling debt and help save on accumulated interest over time. Seeing your balances go down and approaching financial freedom is extremely liberating — perhaps even more so than that jet ski you were eyeing up the other day.
Plan for Future Expenses
Use your tax refund to prepare for future costs. These might be savings for a vacation, savings for holiday gifts, or savings for a major life event like a wedding or a new baby. If you plan ahead, you can justify buying basically anything. This isn’t as recommended if you’re still establishing savings or have outstanding debt, but it’s also a better option than torching your refund the moment you get it on a new piece of tech you don’t need.
Make Home Improvements
If you own a home, consider your tax refund as seed money to pay for much-needed repairs or improvements. Whether it’s a kitchen remodel, a new roof, or some other energy-efficient upgrade, those improvements will boost your home’s value and your quality of life while potentially saving you money on utilities. And as a nice bonus, certain upgrades can even be used as a tax deduction down the road!
Invest
What if you didn’t spend the refund at all and instead put it into stocks or an IRA? These can often generate good returns over time, making it a wise choice for a large sum of money that you’d otherwise spend it just because you can. Make your money work for you instead — provided you’re making smart investments based on a good understanding of the market.
Use It for Self-Improvement
Take the money and invest in yourself — literally. Take a course or workshop to work on skills or a new certification in your career. Not only does that fill your resume out, but it opens you up for better job prospects and a higher income down the line.
While this one is lower on the priority list compared to other ways to use your tax refund, it’s one of the most underrated, since even one course could open you up to new opportunities that change your financial future for the better.
Read More:
- 30 Ways To Get Free Stuff (That Aren’t Scams)
- 12 Best Coupon Apps To Help You Save Money
- 13 Ways To Earn Money From Paid Surveys [At Home, Online & More]
