It’s a new year! We all know what that means…tax season! For some, tax season comes with a tax refund. What do you plan on doing with your refund this year? Many American’s, especially those that fall into the millennial generation, are planning on putting their refund towards paying down their credit card debt after the holiday season. Others are planning on stashing it away for a rainy day or are planning to renovate their home. Whatever your refund may be, here are a few ways you can utilize the extra cash.
Pay Down Credit Card Debt
It may not be the most exciting use of your tax refund, but it may be the most beneficial choice, depending on your circumstance. Many of us find ourselves over spending during the holiday season, typically charging the presents for loved ones to a credit card. Maybe 2017 was a financial strain, but here is a chance to pay down that credit card and eliminate those pesky interest charges. While it may not be the fun choice to pay off a debt, putting your refund towards paying down the balance helps eliminate stress and put your family back on the right financial track. Don’t be discouraged if it is not enough, every bit helps get you closer to your goal.
Pad Your Emergency Fund (Or Start One)
Perhaps you’ve heard of a “Rainy Day” fund or an “Emergency Fund.” These savings accounts are put away in case you have an unexpected financial event in your life. Many of us live with the day-to-day stress that an unforeseen expense may arise, such as the care breaking down, the kids needing new shoes, medical issues, or putting dinner on the table. Living paycheck-to-paycheck can be incredibly stressful, but putting your tax refund towards building an emergency fund can help bring you peace of mind. Don’t let unexpected expenses keep you up at night. Rest easy knowing that you have some money in the bank as a safety net.
Invest in Knowledge
So what if you’re in a good place financially already? Invest in yourself. You are your biggest money making asset and unlike other investments, you control your own rate of return. Whether you put your tax refund towards additional training, a work-related conference or workshop, or you make the decision to get more schooling; you will see large financial returns in the coming years as well as professional growth.
Book That Dream Trip
Lastly, if you still have some cash left over from your refund or you can afford to spend it on yourself, put it towards your dream vacation. Often time’s people will spend their refunds on the newest gadget or gizmo, only to get bored with it until gizmo 2.0 comes out. With a vacation, you’re investing in an experience, and studies show that purchasing experiences tend to bring a boost in happiness that lasts longer than any material purchase.
There are many options when it comes to tax refunds, some more financially sound than others but it all depends on your unique situation. We hope that these four tips can help you get the most out of your tax refund this year and help set you up for financial success in 2018.