As tax season is coming up, many people are anticipating receiving a tax refund. Last year, the average tax refund was $3,036. Many folks might not be thinking about it quite yet, but with the busy holidays fast-approaching, before you know it, you’ll be wondering what the best way to use that chunk of change is.
Here are 10 ways you can jumpstart your financial life before the busy holidays arrive:
- Start or build up your emergency fund. If you don’t have around 3 months of expenses socked away, using your tax refund can be an easy way to give your family a financial cushion.
- Pay off your credit card(s). Even if you only pay off one credit card, you’re freeing up money in your monthly bills to help increase your debt snowball.
- Fund your IRA for the year. With $5,000 being the yearly contribution limit for those under 50, using your refund can take care of 60%. With the power of compound interest, that money can come in handy during retirement.
- Invest in your side business. Do you have a hobby or skill where you earn money on the side? Using your tax refund to make it official can help you build a great income stream doing something you love.
- Start a car replacement fund. Escape car payments for your next vehicle by saving up the cash for it.
- Pay down your mortgage. We did this with our $8,000 tax credit and we knocked off 4 years from our mortgage loan!
- Fix up your home. Do you have a remodeling project you’ve been putting off? With that chunk of money you can update your kitchen or bedroom.
- Donate it to a worthy cause. If you’ve been doing well financially and can part with some or all of your refund, there are some wonderful charities that would appreciate the support. Plus your donation is tax deductible, double bonus.
- Take a well-earned vacation. You can always just save your cash. Going on a paid for vacation can relieve your stress during and after the trip.
- Put some away for your kids’ college fund. This can be a wonderful opportunity to go ahead and start or build up your child(ren)’s 529 plan.
As you can see there are no shortages on how you can use your tax refund for your financial benefit. The great thing is you can accomplish so much with it.
Thoughts on Tax Refunds
If you’re expected a tax refund, what you are planning to do with it? Will you adjust your withholding next year?