Best (and Worst) Ways to Use Your Tax Refund
Tax season began months ago but many people are still waiting on (and receiving) their tax returns. Some will spend their refund on something new for themselves, vacations or even to pay off some debt. Here are some of the best (and worst) ways to use your tax refund.
Ways to Use Your Tax Refund
If you are receiving a sizable amount of money and still waiting on your return you may be wondering to yourself, “can I get a loan against my tax refund?” There’s good news. You can get a loan out against your tax refund and once you do make sure you use it wisely!
The Best Ways to Use Your Tax Refund
Getting a loan out on your tax return is a great option if you’re looking to do something beneficial with your return. Here are a few of the best ways to use your tax refund:
- Paying down/paying off debt. Any time you receive some extra money or a windfall you should try to pay off or at least pay down your debt. If you have a credit card that is maxed out, pay it off with your tax refund or throw some extra money at your regular monthly debt payments.
- Save! In addition to paying down and paying off debt you should also try to save a bit of your return. In theory, many savings plans say you should bank 100% of tax returns and other “windfalls” but, of course, there are a few more great ways to use your tax return. Learn more about how you can set up your savings plan.
- Invest your return. You can also invest your return in the stock market. If you’re new to investing, be sure to get some financial advice before jumping into investing.
- Start a retirement account. One way to invest your cash is opening a retirement account. You can do this through your employer (usually a 401K) or you can open a retirement account through a bank in the form of an IRA.
- Make some renovations. If you own a home you can also invest your extra cash into some renovations. Remember that out-dated kitchen you’ve been wanting to update? Now is the time! This will help your property value in the long-run.
- Make a big purchase that will save you money. Broken down appliances, cars and things around the house are also good things to take care of with your tax refund. You can buy that new dishwasher and possibly even save yourself some money (if it is energy efficient).
The Worst Ways to Use Your Tax Refund
While there are plenty of great ways to use your tax refund this tax season there are also a few really, really bad ways to use that extra cash. Here are a few:
- Buy something unnecessary or create new debt. Some people use their refund for down payments on big flashy items like a new (and unnecessarily lavish) car or a boat. Creating more debt for yourself is almost always a bad idea.
- Gamble your return away. Other people treat themselves to a night out with their return and for some this means heading to the casino. Gambling your tax refund away is one of the worst ways to use your tax refund though.
- Be showy with your cash (buying lavish things). As stated above, buying unnecessarily fancy things with your return is ridiculous. You don’t need those designer shoes. Save your money.
Whether you are getting a loan out on your tax return or simply waiting for it to arrive, be sure you know how you’ll spend your hard-earned cash. As always, remember that adding a portion of your tax return to savings is never a bad idea!
Have a great way to spend your tax return? Share it with us!
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