With tax season upon us, many people are finding out if they are getting a refund, or if they have to pay a bit more in taxes. If you have received a tax refund this year, you may be tempted to spend it on an extravagant vacation or the latest iPhone. However, instead of blowing it on things that won’t help you get ahead financially, you can put it towards bettering your financial future.
Depending on our current financial situation and goals, you may want to consider applying your tax refund to one of the following alternatives. Although putting your refund into accounts you may not have access to at the moment may not seem like fun, it will help you get ahead and your future self will thank you for it!
Pay Off Credit Card Debt or Personal Loans
If you have credit card debt or personal loan debt, consider using your tax refund to pay down your debt. Putting your tax refund towards credit cards, in particular, will help you save more money in the long run because it will eliminate the high-interest payments that are usually associated with credit card debt.
Add it to Your Emergency Fund
By putting your tax refund into your emergency fund, you can have peace of mind knowing that you have the money needed to cover emergencies that may occur throughout the year. Without an emergency fund, if an emergency does pop up, you could find yourself back in debt because you didn’t have the cash available to cover the emergency.
Put it Towards Your Retirement
Putting extra money towards your retirement savings is always a good idea. The more you can save now (when you’re young), the more time compound interest will have to benefit you in the long run. Keep in mind, however, there is a maximum you’re allowed to contribute to retirement savings per year; make sure if you choose to invest your tax refund in retirement that it does not exceed the allowed amount.
Invest in Yourself
Another way to boost your future finances is to increase your value in the working world. You could consider using your tax refund to further your education or take courses that help strengthen your job skills and prepare you for the position in your career that you want!
Save for Large Future Purchases
It can sometimes be hard to save for a large future purchase you know that you will be making such as a car or new home. Putting your tax refund into a high yield savings account (or buying now if you have the cash) can help you get to your goal faster.
If you’ve been thinking about putting some money into the stock market, this could be a perfect way to use your tax refund. You can use the refund to open a brokerage account and start purchasing shares or ETFs!
There are so many uses for your tax refund. Some people may choose to save most of it, but spend a little bit on something they’ve been wanting for a while. While neither route is right or wrong, it is important to think about your future, and how you could be putting your refund to work to benefit you later on.
How are you going to use your tax refund this year? Let me know in the comments below!