It can be tempting to splurge, but with these 9 smart ways to spend your tax refund, you're likely to get much more bang for your buck.
Ahhh, tax season is already here again! On the bright side, that means many of us will be getting tax refunds soon.
You may tend to look at tax refunds as a bonus but actually, it's been your money all along. Simply put, a tax refund is the amount of taxes you paid to the IRS (or state) throughout the year that was more than the amount you actually owed.
Because of this, I think it's really important to spend your tax refund smartly. You may even want to look to see if you can adjust your tax withholdings from your paycheck so you get more money during the year.
In the meantime, check out our ideas below for 9 smart ways to spend your tax refund.
9 Smart Ways to Spend Your Tax Refund
1. Start or add to your emergency fund. In my opinion, you can never have too much money in your emergency fund as you never know what could happen.
Someone in your household could lose their job, you could need to immediately replace a vehicle or move, someone could get sick and so on, sometimes even one right after the other. Sometimes when it rains, it pours.
If you live nearly check to check, just one unexpected large expense could be something you pay for years to come. It can definitely pay to be prepared.
2. Add it to your retirement fund. Over the past several years it's become more and more apparent that we can no longer depend on retirement checks from companies we've worked at or social security.
Keep your financial future looking bright into your golden years by contributing more to your retirement fund.
3. Pay off debt. Have a balance on a high-interest credit card or bills to catch up on? Using your tax refund is a great opportunity to pay them off.
4. Set it aside for a college or education fund. Have kids that you'd like to help out with college costs? Maybe you've been thinking about changing careers or advancing in your degrees or certifications.
Related Article: How To File Your Taxes For Free
5. Use it to give back. Giving back is something important for all of us to do as it reminds us what really matters in life and helps strengthen our community.
Some ideas include buying food for local food pantries or animal shelters, much-needed items for local schools, or even helping out a family member or friend who is having a tough time.
6. Buy something that will help you save money in the long run. Do you have an old refrigerator that uses a lot of electricity?
Haven't made the switch to CFL or LED light bulbs? Have a low mpg car and your commute just doubled?
It may be worth it to invest in newer items that are more efficient to save money in the long run.
7. Use it for something you know you should have, but regularly can't afford. Have you been skimping on things like a doctor or dentist or visit, health or life insurance, a certification to advance your career, etc?
8. Build equity into your home. Building equity in your home is always a good thing, especially if you think you might want to sell soon.
Even with a few thousand dollars, you can do things like new paint, kitchen counter tops, flooring in a room or 2, new fixtures, etc.
Making things look new and updated will go a long way to getting more money for your house, versus prospective buyers walking through and wanting to offer less because they see many things that need updating.
9. Super stressed? Treat yourself to a short vacation. Was the previous year super stressful and you really feel like you need a breather from it all?
If there's nothing else that needs to be paid ASAP, taking a short vacation to rejuvenate yourself and help you be ready to tackle the new year may just be worth investing in!