Are you receiving a tax refund? Before you start planning a shopping spree, consider putting that money to good use.
This blog shares six smart ways to use your tax refund, from paying off debt to investing in your future.
1. Pay Off Debt
One of the most responsible ways to use your tax refund is to pay off debt. Credit card debt, car loans, student loans, and personal loans can all be tackled with a lump sum payment. Consider paying off high-interest debt first, as it’s costing you the most in interest charges. Not only can paying off debt save you money in the long run, but it also can help your credit scores. If you need help getting started with a debt pay-off plan, talk with one of our qualified coaches today – for free.
2. Start Building an Emergency Fund
If you don’t have an emergency fund, now is the time to start one. An emergency fund is money for unexpected expenses such as car repairs, medical bills, or a sudden job loss. Financial experts recommend having three to six months’ worth of expenses saved up in an emergency fund.
3. Put Money into a Retirement Account
Saving for retirement is essential, but finding the extra cash to contribute to a retirement account can be challenging. Use your tax refund to contribute to your IRA or 401(k). Not only can you put your money to work, but you can also be lowering your taxable income for the year.
Another way to put your tax refund to work is to invest it. Several investment options include stocks, bonds, mutual funds, and real estate. Before investing, do your research and consider your risk tolerance. If you’re uncomfortable making investment decisions on your own, consider seeking the advice of a financial advisor.
5. Make Home Improvements
If you own a home, consider using your tax refund to make home improvements. Upgrades like a new roof, energy-efficient windows, or a bathroom renovation can increase the value of your home and save you money on utilities. Not only can you enjoy your home more, but you also can make a wise investment.
6. Give Some Money to Charity
If you’re comfortable financially, consider giving some of your tax refunds to charity. You can donate to a cause that’s important to you and makes a difference in the lives of others. Plus, charitable donations are tax-deductible, so you are doing a good deed and lowering your tax bill at the same time.
How to Check the Status of Your Tax Refund?
To check the status of your tax refund, you can use the “Where’s My Refund?” tool on the IRS website. Or you can also call the IRS refund hotline at 1-800-829-1954 to check on your refund status.
What Is the Best Way to Receive a Tax Refund?
The best way to receive a tax refund is through direct deposit. Direct deposit is fast, secure, and convenient. It typically takes less time to receive your refund compared to receiving a paper check in the mail.
When you file your tax return, provide your bank account information, and choose direct deposit as your refund method.
The Bottom Line
It’s important to use your tax refund wisely to help improve your financial situation.
You can achieve this by seeking help from a licensed financial coach and utilizing the financial budgeting platform Credit & Debt to help manage your money and create a personalized financial plan.
With the right approach, you can make your tax refund work for you and pave the way for a more secure financial future.