Ways To Spend Tax Refund: You filed your personal income tax return on time and now you just received a notification of your refund. There is so much to celebrate, isn’t it?
While you may have a number of tempting reasons to splurge on yourself, there are surely better methods you can utilize your tax refund.
So, you can thank us later! Here are some smart and effective ways to spend your tax refund:
P for Practical
Have you also made a list to spend your tax refund? Well, before you spend the whole refund on that one dress you have always wanted or pile products into your virtual shopping cart, just take a moment and do yourself a small favor: click pause and analyze areas where you can practically spend your money. Now, what is practical you may wonder! It is thinking reasonably and taking steps wisely.
Begin An Emergency Fund
Again, this may sound a bit no-brainer but when a frail day will hit you in the future, you will probably feel proud to have taken this intelligent step.
And if it feels really painful to put the whole refund money into an emergency fund, then you can consider the half amount. Half or full, you should definitely start an emergency fund.
Let’s admit, there come times in every individual’s life when he or she struggles to manage unexpected expenses and thus go into debt. Needless to say, debt is an unnecessary liability, be it small or large.
Clear off Debt
As mentioned earlier, debt is one of the worst liabilities that should be avoided.
While some of you may be owing money on a student loan, others may have an auto loan. Both ways, one may not clear off such loans by a tax refund. However, if the refund money is considerable, then you must try to get rid of your debts in the first place.
Credit cards also come under debt. In short, you should know how to spin your wheels and make the most of your tax refunds.
Read More: Safest Way To Cancel Your Credit Card
Put It In A Savings Account
As per the data published from the Federal Deposit Insurance Corporation, the interest rates for savings accounts average .07 annual percentage yield in the present time.
However, you can also discover savings accounts as well as CDs that are above the national interest rate average. And if you search out an account higher than 1 percent, then you may consider yourself a winner.
In addition to this, if the odds are decent that you will still spend a portion of your tax refund on an item you’ll use once, putting the rest amount in a savings account will eventually give you back a little extra cash in interest.
Save For A Future Expense
There is no harm in being a little proactive and considering savings. We all have a list of expensive things we wish to buy someday in our life. If you don’t have any debt to pay off and you don’t want to put it in a savings account, then you can save your tax refund for those purchases you will make in the near future.
As a wise man once said, “not budgeting for necessary but irregular expenses is a classic way to build financial problems”. So, the very first thing you should do is put some money into an emergency fund and thereafter keep adding money into it for your big purchase.
Plus, keep your emergency fund in an online banking solution. Otherwise, it will become your everyday checking account.
Read More: Best High-Yield Savings Accounts
Renovate Or Repair Something In Your Home
Always, there used to be something that needs to be repaired or renovated in every house.
A house is probably one of the most valuable assets of an individual. So, one should always try to keep it that way.
Additionally, if you spend money at the right time you will save more in the long run. For instance: if something needs repair, such as water damage, it will just get worse, thus creating extra expenses for a person.
So, when you receive your refund, you can also utilize it to repair damaged things in your house.
Read More: Best Home Improvement Loans
Use It For Your Child’s College Education
This option is for all the parents out there. Your little kids may be getting older, and you are truly going to see them in colleges even before you realize. So, it’s better to plan in advance to avoid those hefty college expenses.