Tax season is finally coming to an end. For those who’ve already filed your taxes before the April 15 deadline, you may be expecting a refund to arrive in the mail.
Many filers get refunds for overpayments made to states or the federal government. Although that money was yours to begin with, a refund can feel like free cash. But don’t squander it! There are plenty of wise ways you can use a tax refund that will help you financially in the long run.
Here are five great ideas for using your tax refund:
- Save it. If you have nothing pressing you need to pay off or invest in, deposit that refund check in a savings account. Keep the funds for another day when you need a few extra dollars.
- Create an emergency fund. Similar to saving your money, creating or contributing to an emergency fund gives you some flexibility if you find yourself in financial difficulty. This fund should be reserved for emergency situations – a hospital visit, a natural disaster or loss of a job. You can continue to build that fund with small efforts over time.
- Pay off credit card debt. Carrying credit card debt haunts you when you need to make large financial decisions such as buying a car or renting an apartment. One of the best ways to boost your credit score is to pay off the balance on your cards. If you have more than one card, pay the one with the highest interest rate first. Depending on the size of your tax refund, you can put a big dent in credit card debt.
- Pay off student loans. Just like credit cards, student loans accumulate a lot of interest. If that debt is weighing heavily on you, pay down some of that amount with your tax refund and find ways to consolidate the balance.
- Invest in something you need. It’s tempting to use your tax refund to buy those items you’re just dying to have – new clothes, shoes or decorations for the house. Instead, use your refund for something you need – repairs to the car, a new washing machine or stock up on non-perishables for the pantry.
Set yourself up for financial success with these tips on spending and saving your tax refund!