If you’re one of the millions of Americans who receive a tax refund each year, you understand how exciting it can be to get that extra money. But sometimes that excitement comes with spontaneous spending. Before you know it, your tax return entirely vanishes before your eyes.
Your tax refund is a chance to invest in yourself, to turn your money into even more money, and to provide more significant opportunities for you and your family. Before Uncle Sam's check pulls a disappearing act, check out this list of smart ways to use your tax refund.
1. Free yourself from debt
High-interest credit card debt puts a lot of weight on your shoulders. Always worrying about paying off debt makes it hard to enjoy everyday life and to plan for the future. Rather than let your interest compound and make the burden even more cumbersome, use your tax refund to pay off any high-interest debt. If your tax refund doesn’t cover the entire balance, see if you can transfer the remaining balance to a lower interest card, or look into some other debt-consolidating options.
2. Create an emergency fund
Even with good insurance, many of us worry about all the things that can happen unexpectedly that either cost a lot of money to replace or can cause a significant loss of income. Setting aside an emergency fund can help alleviate some of that stress. Your tax refund is a good starting point. Save enough until your emergency fund is large enough to cover three months of necessary expenses.
3. Save for a rainy day
A savings account is a great place to keep your emergency fund and any additional savings. In addition to earning more interest, you can also sign up for SaveYourRefund and be entered to win cash prizes for every $50 of your tax refund you save.
4. Invest in yourself
You are your greatest asset after all. Using your tax refund to fund additional education, training, and experiences related to your field of work can help you gain more money in the long run. Cash in your tax refund for a resume booster to help you earn a raise or land a higher-paying job.
If you’ve been sitting on a business idea for a while, your tax refund can help be the seed money to get it up and running. Starting a business with your tax refund money could be the beginning of substantial earnings all year round. You are taking a risk—but betting on yourself ensures you keep working hard to reach your goals.
5. Invest in your future
Put your tax refund into a tax-sheltered account, such as an IRA or a 529 college savings account. Your future-self will thank you for planning —you’ll avoid a considerable amount of loan interest when you send your kids to college, and you might even earn extra for your retirement years.
6. Start a home makeover
Want to finish your basement or remodel your kitchen? Using your tax refund on home improvement projects can improve your enjoyment of your home, and also add to its value. If you decide to sell your home, you may earn back more money than you put into the project. Check out these home improvement projects suggestions from Consumer Reports ®.
7. Buy something you truly need
If you’ve had something on your shopping list for a while that you need but haven’t quite been ready to afford, now may be your chance. Lots of purchases can be considered necessities even if you’re able to put them off for a while. Buying something like a new winter coat, repairing your car, or upgrading your laptop with your tax refund may be the way to go if you think it will improve your life significantly.
8. Treat yourself
Okay, not everything you buy with your tax refund has to be a necessity. You are allowed to treat yourself with the money you’ve earned once in a while. With this in mind, we recommend splurging on memorable experiences over material objects. The enjoyment and happiness you get from going to a concert or taking your family on vacation last much longer than purchasing something you don’t need.
9. Give it away
Multiple studies have shown that being generous makes you a significantly happier person. Whether you decide to spend your tax refund on a loved one, a stranger, or donate it to a cause you care about, you’ll end up feeling even better than you would have had you spent it on yourself. Charitable donations are eligible for tax deductions, so, as a bonus, donating this year's tax refund to charity may earn you an even bigger tax refund next year.
What else can you do?
If you receive a tax refund, it means you’re withholding more than you need to each paycheck. You can look at this like a forced savings plan, setting aside a little each month that you'll get back next year, but you’re giving the government an interest-free loan every year. If you’d rather take home more money than receive a tax refund, update your tax forms or hire a tax agent to see what changes you can make.
Your tax refund isn’t the only way you can save your hard-earned money. Infinity insurance can help you save for the things that matter most in life by providing reliable insurance and peace of mind. Call one of our friendly agents at 1-800-INFINITY today or visit our website to get a quote within minutes.