7 Smart Things to Do with Your Tax Refund
If you have been given a tax refund, then you can easily utilize it in various ways. It doesn’t matter how much you get refunded either because as long as you are willing to reinvest it, then you can easily make a difference to your personal situation. Check out the 7 Smart Things to Do with Your Tax Refund to help plan your financial future. Its a good idea to have your financial goals identified so when you get a windfall payment like a tax refund you will know how to properly use it to your advantage.
1 Pay off any High-Interest Debt
If you have a very high-interest credit card balance, then you will know how debilitating this can be. You may feel as though you are paying out way more in interest than you should be and that you are also not able to clear your debt fast enough. If this is the case, then you have to resist the temptation to book a holiday with your refund. Instead, the reinvest it so that you can clear your debt as fast as possible. You can also try and do the snowball technique if you want. When you do this, you simply start out with the highest-interest debt you have, and then when that is paid, use the money you would normally be putting towards that to pay off your second-highest debt, and so forth. If you don’t have any credit card debt, then this is great, but put your money towards your car debt or even your student loan debt instead. You will be really glad that you did, and it is a fantastic way for you to put your money to good use. This should be one of the top priorities for your tax refund.
2 Increase your 401K
Another thing that you can do is try and put your tax refund towards your 401K. When you do, you may find that your company matches whatever you put in, and this is a fantastic way for you to really make the most out of your retirement fund. If you want to increase the amount you put in even more, then consider taking more out of your paycheck. Sure, your monthly income will be lower, but at the end of the day, it gives you the chance to invest in your retirement while also being able to lower your taxable income significantly.
3 Increase your Down Payment
If you are in the middle of saving up for a new home, then why not use your refund to pay your down payment? This is a fantastic way for you to avoid a costly mortgage deal, and it will also reduce the amount of your mortgage too. The great thing about doing this is that the bank may even give you a much better interest rate as you are putting down a bigger payment, so it’s well worth keeping this in mind. If you already own your home outright but want to do a big home-improvement, then put your money towards that. When you do, you can easily make your home way more functional while boosting the resale value significantly.
4 Make an Investment
Maybe you want to invest in real estate, a technology start-up, or even a stock that you strongly believe is about to soar, but you have been waiting until you have a bit of extra cash. Either way now is the time for you to really take the plunge. If you have done all of your research and want to take a calculated risk, then why not use your tax refund to help you go that extra mile? It saves you from having to dip into your savings account, and you would be surprised at how much this could pay off for you in the future. If you aren’t sure where to invest or even how then you have nothing to worry about because there are so many professionals out there who can give you the help and support you need. Some of them will even invest the money for you, so you don’t have to worry about making those big, all-important decisions.
5 Make an Investment that Saves you Time and Money
Consider dedicating part of your tax refund to a service that can save you money, or even time. One example of this would be for you to invest in a meal-delivery service that will provide your food for a year. When you do this, you won’t have to worry about cooking, and it may even end up being cheaper than your grocery shopping. You can then free up some of your monthly budget without having to worry about a thing. You will really appreciate this when you are in the middle of a very busy work week, and you may even find that you are able to use your extra money each month for another investment that makes your life even easier!
6 Give a Tax-Free Gift
If you have a very good financial portfolio and you know that you are nearing your retirement, then it may be worth gifting some of your excess money. It’s possible for you to give your children a set amount of money every year, and when you do, you won’t even have to file a gift tax return either. This ultimately means that your children are going to benefit from your money without having to pay inheritance tax.
7 Invest in a Business Idea
Other smart things to do with your tax refund is invest in a business idea. When you do, you will easily be able to reap the benefits. Some business owners will also give you a percentage of the company in return for your investment, and this is the gift that really does keep on giving. If you are not sure how to do this, then there are so many website platforms out there that can help you to do this, and you will be given a level of protection with this as well. If you are planning on investing like this, then it may be worth consulting a financial adviser as they will be able to tell you how much money you have to spend comfortably, while also giving you the chance to understand the terms and conditions of your investment. Sure, it will cost you money, but it’s well worth it.
Investing in yourself should be your primary financial goal. To do this, you need both long-term and short term goals. It’s important to save for the unexpected and retirement. Your tax refund is an unexpected windfall that can go along way to accomplishing your financial goals. Planning on the Smart Things to Do with Your Tax Refund and other unexpected payouts will be you on a better financial footing going forward.