How to Spend Your Tax Refund Wisely
It’s tax season, which means you may be coming into some money in the near future. According to U.S. News and Money, in 2016, 111 million Americans received a tax refund, with the average amount being $2,860. On the flipside, you may not be due anything. The IRS anticipates that 30 percent of taxpayers will not receive a refund this year. If you do receive a refund, deciding what to do with it can be a challenge. Should you invest it? Save it? Treat yourself? While the options are endless, here are just a few ways to wisely spend that money.
Pay Off Debt
The benefits of paying off debt cannot be understated. When you reduce your debt, especially high-interest credit card debt, you’re inadvertently saving money too. The more lines of credit you have, the more bills you have to keep up with and pay on a monthly basis. The sooner you become debt free, the sooner you’ll have fewer expenses each month. According to The Balance, having too much credit card debt can also reflect poorly on your credit score. Your credit score can also take a hit when your credit card balances are nearing your credit limit
Vehicle or Home Maintenance
There are many tasks that every car owner should take care of on a regular basis. If these tasks are ignored, the cost of repairs can skyrocket. It’s often said that it’s cheaper to see a mechanic to prevent problems than it is to constantly go to a mechanic to fix problems. How’s the tread on your tires? Maybe you’re due for a new set. What about your battery? If it’s more than five years old, it might be a good idea to get it replaced before it dies at an inconvenient time.
The same idea applies to your house. For example, if you never clean your gutters, this can lead to water accumulating around your home's foundation, which may lead to a flooded basement. Use your tax refund and have your gutters professionally cleaned out, or any other home improvement expenses you’ve been putting off.
Save for Retirement
If you earned a tax refund of $1,000 or more, that money would be a great contribution to your retirement account. If you haven’t begun saving for retirement, it's just enough to get you started. Many retirement plans require a $1,000 minimum contribution. Keep in mind that if you have a 401(k) and an employer that matches contributions, you may be able to place the $1,000 in your plan to potentially double your money.