Every year, millions of Americans receive a tax refund. If not planned for, the funds might be spent quickly and frivolously on the wrong things. Here are a few suggestions to help you make smarter decisions when it comes to spending your tax refund this year.
1 Pay off high-interest credit card debt
If you’re struggling with lingering high-interest credit card debt, paying it off is one of the most strategic uses for your tax refund. It can be a big step towards your financial freedom. Paying down credit card debt can help you save on interest and boost your credit score. Start with the highest rate cards first.
2 Save your tax refund
Saving your refund money or starting an emergency fund is a smart way to accomplish financial security. You may have depleted your emergency fund in recent years. Without a doubt, building it back is an important goal. An emergency fund is an important tool that can help in the event of a job loss, salary decrease, or unexpected expense. Financial emergencies happen all the time, from a medical expense to a furnace breakdown. Using your tax refund to add to existing savings or start new savings can help you from going into debt to cover these expenses. Whatever your saving goals, your tax refund can help you achieve them faster. Tap here to learn more about how much you should have saved in your emergency fund.
3 Give your retirement savings a boost
Prioritizing saving for retirement is one of the most important things any of us can do. Contributing your refund to your IRA can help you build for a more comfortable retirement. It’s one of the best strategic uses for your tax refund. Moreover, contributing to your IRA is also a great way to grow your refund.
4 Pay off student loans and other debt
Similar to paying off high-interest credit card debt, paying off other unsecured debt, such as personal loans or student loans, can help you save on interest. You can also put it towards the principal on your mortgage. Without a doubt, paying down any debt is an important use for your tax refund.
5 Use it to improve your home
Putting your tax refund towards a needed home improvement project is another of our strategic ways to use your tax refund. The money spent will add to the value of your home. Think updating a dated bathroom or replacing aging appliances. If your refund isn’t enough to meet your home improvement needs, you may want to consider a Home Equity Loan or a Home Equity Line of Credit from Benchmark Federal Credit Union.
6 Invest your tax refund in yourself
Using your tax refund towards continuing education or training to advance your career, or to start a side gig, are strategic investments that can reap big rewards. Whether you’re aiming for certification or just enhancing your knowledge to help you reach your career goals, investing in yourself is an investment worth making. Make better use of your refund by using it to take your skills to the next level.
7 Donate your tax refund
If you don’t need your tax refund to pay down debt or build savings, donating it to your favorite charity can give you the opportunity to support a cause that is important to you and your community. Charitable donations may also offer some tax benefits when filing next year. Speak to your tax advisor to learn how to claim tax-deductible donations on your tax return.
Consider our strategic uses for your tax refund
No matter what the amount, when used wisely, your tax refund can help you reach your goals faster. To recap what we mentioned above, saving it, investing it, or using it for home improvement are just a few strategic uses of your tax refund. Acting responsibly and putting your refund to work for you in one of these ways can help you improve your financial situation.
Read more articles like this and helpful financial tips on the Benchmark Blog.