With the average tax refund expected to reach over $3,000 each this year, not to mention 83% of returns resulting in a refund, there will be the potential for many of us to turn right around and spend on goods and services such as retail items and vacations. Finding out you have extra money coming will definitely make your day. You could now buy the new computer you have previously not been able to afford, give you the urge to go on a shopping spree for a new wardrobe, or put towards a week away somewhere warm after a long cold winter. You must do your best to resist. Although this may not be as much fun as you would have in Las Vegas for a weekend, here are five ways to use your tax refund that will help you achieve future financial success:
Pay Down Debt
Carrying credit card balance not only adds up to huge interest payments, but it also holds you back from getting ahead, so make sure balances are paid down right away, especially the cards with the highest interest rates, which some can be over 16%. Next any additional should go towards personal or car loans, followed by student loans, typically with the lowest interest rates.
Build an Emergency Fund
With varying recommendations of needing between 3-12 months of expenses set aside into an account for emergencies, even something in this fund is better than nothing, so if you do not currently have an account open now is the time. Not only your tax refund, but continue to make contributions each paycheck, as you will be glad you had money stashed away when your car breaks down or there is an unexpected medical bill.
Fund Your Individual Retirement Account
Even if you have been contributing to your 401K through work all year, you can open up your own IRA account, with maximum contributions of $5,500 per year, $6,500 for those 60 and over, to save for retirement with either tax-free growth, or have tax-deferred.
Once you have built up a sizable savings account, you may decide to open a brokerage account to use your tax refund for investment purposes only, as experts say to never open a brokerage account with money that you will need in the next six months. With professional translation services to companies from various industry sectors, online brokerage options today are affordable and user-friendly.
Upgrade Your Home
For a few hundred dollars you could give your entire home a complete makeover with fresh paint, from a new wall color, to recoating the ceiling and trim with a bright white to really make them pop. To add to your curb appeal, repaint porch posts, plant flowers, lay fresh mulch in flower beds to give new life to your lawn. For those with extra money to spend, upgrading appliances, floors, cabinets, and faucets would add instant satisfaction to your home to last years to come.