7 Wise Uses for Your Tax Refund
If you recently received notification from IRS that you will soon received your tax refund in your bank account, you might be picturing yourself on a beach somewhere sipping adult beverages from a coconut-shaped cup with an umbrella. If your 2014 tax refund will be sizable, you might first wish to consider changing your withholding so that you get more money in your paycheck each month.
However, since you already allowed IRS to hand onto too much of your income, and they have to send you the refund anyway, you may as well spend it wisely. The Tahiti trip is expensive; try these seven wise suggestions instead.
Axe Your Credit Card Debt
I hope you weren’t planning to deposit your tax refund into your savings account. Unless you have a magic account that earns more than average interest, paying off or paying down your credit card debt will offer more bang for your bucks. When you pay off your credit card debt, your rate of return equals whatever is your interest rate on that card. A 15% rate equals a 15% return on your money—instantly.
Build an Emergency Account
While most financial planners would recommend you have an emergency fund with several months salary squirreled away in case of emergencies, few people actually attain it. If your emergency fund is at emergency status—code red lo balance—you can use your tax refund to start building an emergency account for yourself.
Fatten Up Your Retirement Kitty
Once you have contributed the maximum matched amount to your employer’s retirement plan, you can start saving for retirement in additional ways. Consider starting a Roth IRA or a traditional IRA with your income tax refund. Which one you choose is dependent upon your income and marital status, so consult a financial adviser.
Make Repairs & Upgrades
Things break and repair costs add up quickly: water heaters, a coat of paint on the house new marcite on the swimming pool… The list can be endless and sometimes you hold off on those repairs for “someday.” While purchasing a new wardrobe or taking a vacation sound like great uses for your tax refund, they won’t do you any good if the roof starts leaking because you didn’t fix it soon enough.
If you’re caught up on repairs, you might want to upgrade to more energy efficient appliances, new windows or additional insulation for your home. Not only will these improvements add value to your home, but their energy efficiency also will save you money in the form of rebates and lower utility bills.
Invest in Yourself
Have you considered a career change but need additional education? Do you desire additional certifications or have you thought about taking continuing education classes? An investment in additional education is an investment in you and your future, and it is a great way to spend your tax refund.
Create a Car Fund
Let’s face it, cars break down, and car repairs never seem to come at an opportune time. Set aside your tax refund money for automobile repairs or for the purchase a new vehicle when the time comes.
Start a Side Business
Starting your own business does not have to take a large initial investment. Your tax refund could be just the money you need to begin coding or consulting from home.
If none of those options sounds appealing, why not donate all or part of your tax refund to a worthy cause that supports women. Your unexpected financial windfall could help another woman stand on firmer ground and build a future for herself.
11