We are right in the midst of tax season. Even though you may be feeling overwhelmed, frustrated, and just completely stressed out due to your taxes, there is a silver lining. Many of us will be receiving a tax refund this year. According to the IRS, refunds were issued for 83% of the tax returns received as of February and the average refund was $3,120. That’s quite a substantial sum, but what exactly do you do with the money?
Your tax refund can be the biggest payday of the year for you. Even though you may be tempted to splurge and treat yourself to something fancy, there are smarter ways you can spend your money instead. Here are five wise ways to spend your tax refund this year:
Pay Off Your Debt
Having debt looming over your head is never a good feeling. If you do have extra money to spend, such as a tax refund, consider putting at least a portion of it towards paying off your debt. The faster you pay off your debt, the more money you’ll save. Start with the highest interest debt first, then work your way down your list as you go.
Bulk Up Your Emergency Fund
You’ve probably heard this a million times, but most people need to hear it again – never underestimate the value of having an emergency fund. Accidents happen and unexpected expenses occur. Having an emergency fund ready to go can help put your mind at ease, especially in tough times. Put your tax refund towards bulking up your emergency fund. Generally, it’s a good idea to have at least three months of expenses on hand.
Save Up for Retirement
It’s never too early to start thinking about retirement even if your golden years may be years or even decades away. The earlier you start saving for retirement, the more money you’ll have later on. Consider putting your tax refund towards a retirement account, like an IRA.
Upgrade Your Home
Home maintenance and repairs can sometimes fall to the bottom of our list, especially with all the other expenses we have in our lives. But if you have money to spare, it’s a good idea to put it towards upgrading your home. First, it helps with your property value, if you own and want to sell in the future. Second, it can also help you save money in the long run. For instance, replacing your old appliances with energy efficient ones will cut down your utility bills significantly.
Invest in Yourself
Lastly, regardless of your financial situation, it’s always a good idea to invest in yourself. Think about it this way: how can you use this money towards bettering yourself? Perhaps there’s a class you’ve always wanted to take to improve your skills. Or there’s somewhere you’ve always wanted to go. Life is about experiences so don’t be afraid to spend on them.
How are you planning on spending your tax refund?
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