If you’re lucky enough to be getting a tax refund this year, have you given thought to what you should do with it?
If not, it would be wise to map out a plan for spending (or saving) it. Whether you ultimately decide to save every penny, put it all toward a major purchase like a new car, or spread it out to pay for various needs and wants, taking some time to think things through will help you to make the most of your tax refund.
Here are some ideas to consider:
Pay off debt. While it might not sound like much fun to use your tax refund to reduce your debt load, it might be your wisest option. Paying down credit card debt, or making up missed or late payments on loans or utility bills can be a good first step toward improving your credit score.
Create a “rainy day fund.” We all have those days when some extra cash would sure come in handy, like when the roof springs a leak or the dishwasher gives out. Worse yet, an unexpected illness or injury could keep you from working. If you have some money saved up for emergencies, it can help you to pay your mortgage, rent, or other bills until you’re back on your feet. If you don’t already have a savings account set up, you could open one with some of the money from your refund.
Contribute to an IRA. If you have an IRA, or Individual Retirement Account, you could deposit some additional funds, and if you don’t yet have an IRA, now could be a great time to open one and start saving for retirement. IRA contributions are generally tax-deductible as well.
Pay for something that you’ve been putting off. Maybe it’s an aching tooth that’s been bothering you for a while. Or maybe you really need a new pair of glasses. Whatever the need, having some extra funds on hand can help you to make some of those purchases you’ve been procrastinating about.
Tackle a few home improvements. Your tax refund could allow you to pay for a reasonably priced project like painting a bedroom or installing new carpeting. And if you have your eye on a larger-scale home improvement project like adding a new garage or an in-ground swimming pool, you could always use your tax refund to help secure the additional financing you’ll need.
Refinance your mortgage. If you have a chance to lock into a lower interest rate, refinancing your mortgage could be a good way to save money over the long term. You typically will need to pay closing costs and other fees when you refinance, so if you have a sizable tax refund coming your way, it could be a good time to consider refinancing.
Make an additional one-time payment toward your mortgage. If refinancing isn’t an option for you, you can still help to reduce the length of your loan by making a one-time payment toward the principal of your mortgage. Be sure to check with your lender first though, as some may charge a prepayment penalty if your pay off your mortgage early.
Invest in yourself. Whether it’s an online college course, a professional certification program, or returning to school full time, having some extra cash on hand could allow you to fund your educational aspirations. The payoff might be in the form of a salary hike, or it could just be the gratification gained from learning something new.
Splurge a little. A trip to Ireland would be nice, wouldn’t it? Or have you had your eye on an electric scooter? It’s your call, and your money, so what’s to stop you? With a little extra money in your pocket, now could be the right time to chase down that dream!
If not, it would be wise to map out a plan for spending (or saving) it. Whether you ultimately decide to save every penny, put it all toward a major purchase like a new car, or spread it out to pay for various needs and wants, taking some time to think things through will help you to make the most of your tax refund.
Here are some ideas to consider:
Pay off debt. While it might not sound like much fun to use your tax refund to reduce your debt load, it might be your wisest option. Paying down credit card debt, or making up missed or late payments on loans or utility bills can be a good first step toward improving your credit score.
Create a “rainy day fund.” We all have those days when some extra cash would sure come in handy, like when the roof springs a leak or the dishwasher gives out. Worse yet, an unexpected illness or injury could keep you from working. If you have some money saved up for emergencies, it can help you to pay your mortgage, rent, or other bills until you’re back on your feet. If you don’t already have a savings account set up, you could open one with some of the money from your refund.
Contribute to an IRA. If you have an IRA, or Individual Retirement Account, you could deposit some additional funds, and if you don’t yet have an IRA, now could be a great time to open one and start saving for retirement. IRA contributions are generally tax-deductible as well.
Pay for something that you’ve been putting off. Maybe it’s an aching tooth that’s been bothering you for a while. Or maybe you really need a new pair of glasses. Whatever the need, having some extra funds on hand can help you to make some of those purchases you’ve been procrastinating about.
Tackle a few home improvements. Your tax refund could allow you to pay for a reasonably priced project like painting a bedroom or installing new carpeting. And if you have your eye on a larger-scale home improvement project like adding a new garage or an in-ground swimming pool, you could always use your tax refund to help secure the additional financing you’ll need.
Refinance your mortgage. If you have a chance to lock into a lower interest rate, refinancing your mortgage could be a good way to save money over the long term. You typically will need to pay closing costs and other fees when you refinance, so if you have a sizable tax refund coming your way, it could be a good time to consider refinancing.
Make an additional one-time payment toward your mortgage. If refinancing isn’t an option for you, you can still help to reduce the length of your loan by making a one-time payment toward the principal of your mortgage. Be sure to check with your lender first though, as some may charge a prepayment penalty if your pay off your mortgage early.
Invest in yourself. Whether it’s an online college course, a professional certification program, or returning to school full time, having some extra cash on hand could allow you to fund your educational aspirations. The payoff might be in the form of a salary hike, or it could just be the gratification gained from learning something new.
Splurge a little. A trip to Ireland would be nice, wouldn’t it? Or have you had your eye on an electric scooter? It’s your call, and your money, so what’s to stop you? With a little extra money in your pocket, now could be the right time to chase down that dream!