It’s the most wonderful time of the year! No, it’s not Christmas, it’s tax season! Whether you get a few hundred or few thousand dollars back, you should plan to use your tax return in ways that will greatly benefit your future.
1. Start or increase your emergency fund. Without any kind of emergency fund, one major expense can be detrimental to your financial stability. Most financial experts say that your emergency fund should consist of anywhere from three to eight months’ worth of savings and setting aside your tax refund could be a significant step in reaching this goal.
2. If you have high-interest debts, making an extra payment toward the principal with your tax refund money could help cut down the total interest you pay over time. There are various debt-elimination theories and programs, but most all of them recommend getting rid of your high-interest debts as quickly as possible.
3. With continual fears over the dwindling down of social security, many Americans are looking into private investing to build up their retirement savings. Putting your tax refund into a Roth IRA, HSA, brokerage account or any other form of investment can greatly impact your future and help you set aside enough money to live comfortably after retirement.
4. It’s never too early to start saving for your children’s education. Higher education is costly and having a fund set up that you periodically put money into over time can quickly add up and cut down the cost of college. You can even start an investment portfolio in your child’s name so that if you aren’t contributing regularly, the account still has the potential to be earning money.
5. Home improvement projects can help significantly increase the value of your property in the event you want to sell in the future. Utilize your tax return to help fund major projects like replacing the roof or purchasing updated, energy-efficient appliances that can help lower your utility bills over time. Your home is, in most cases, an appreciating asset so make sure you are giving it the care and attention it needs in order to provide the most value for your future.