5 Ways to Smartly Spend your Tax Refund
The hassle of tax season almost seems worth it if you’re one of the lucky who get a nice return 30-60 days later. When a check substantially larger than a typical paycheck gets in your hands, the first thoughts might be to spend it on superfluous family expenses.
However, as the saying goes, it’s better to be safe rather than sorry. Having a plan for how to spend your tax refunds – smartly – can not only put you in a financially healthy place, but can also allow you to be freed up for future spending.
The following are 5 smart ways to spend your tax returns this year.
Pay off high interest debt.
This kind of debt will come and bite you in the butt if you aren’t careful. Whether it’s 20% interest on a credit card or 9% interest on a car loan, chances are that even if you’ve put your family investments in equities or other conventional asset classes, you wouldn’t get a higher return than the reduction in high interest debt. Plus, debt write-downs are guaranteed and involve no uncertainty or volatility.
Build an emergency fund.
This was tied with paying off debt as being a hugely important item to pay off. Putting every penny into an emergency fund will be able to increase your family savings and amount you will be able to live off when you reach retirement. An emergency is also logical in today’s career market. Having a fun with locked funds that can pay for necessities like groceries if something should happen to your job is extremely smart.
Invest.
If recent times have taught us nothing else, it’s to invest early because you never know what the economy will bring us. These investments will help allow you to be more self-reliant as the year’s progress, and can offer you security in your later years. You don’t necessarily need to invest your entire tax return, but investing a bit every year will allow you to greatly reduce your financial burdens.
Save for college.
Even if you don’t have kids yet, or their just crawling around in diapers, with college costs rising by 2-3 times the rate of inflation annually, a college education might be impossible to afford when they reach college age. Many banks offer college-specific savings accounts with small fees and high interest rates.
Enjoy an experience, not an item.
Many people like to use their tax returns on something nice for themselves. There is nothing wrong with that! However, instead of buying a larger TV or the new iPhone4, try spending it on an experience with your family. Living Social, an online coupon system, offers discounted weekend getaways every week!
