W-2? Check. Taxes done for free? Check. Tax refund in your bank account? Check! When you’re counting on some extra cash this time of year, waiting until April to file your taxes just isn’t an option. A tax refund is the biggest paycheck of the year for many filers, but it’s important to think carefully about how you want to use these extra funds. Refunds only come once a year! Here are my top tips for how to spend your refund wisely:
Save That Money
Planning a big trip this year? Want to buy a car? Just need an emergency cushion? All are good reasons to put your refund in your savings account. Experts suggest having at least six months of living expenses saved up for emergencies, like losing a job. Does that amount sound like a pipe dream? A tax refund is a great way to get started on building a solid safety net for yourself.
Kill Your Credit Bill!
This may not seem like the most exciting way to spend your refund, but building and maintaining a good credit score takes discipline. Start by paying off a credit card bill with the highest interest rate – you’ll be thankful in the future.
Invest in Your Future
Is your bank account already feeling pretty solid? It could seem like a long way out, but your refund is a great way to boost your retirement fund. The earlier you invest, the more gains you likely reap in the long-term – that’s the beauty of compounding interest! Plus, 401(k) and IRA contributions reduce your taxable income, so you may lower your taxes for next year! Two birds, one stone.
Give Yourself Some Love
There’s nothing wrong with putting a portion of your refund aside to #TreatYoSelf! You work hard every day, and you deserve to take care of yourself. Register for a gym membership, go out to a nice dinner, or even splurge on a new pair of shoes. Don’t forget to have a little fun this tax season!
How are you going to use your tax refund? Let me know in the comments!
Chelsea Krost is the founder and host of #MillennialTalk, a weekly Twitter Chat for the Millennial generation. This Tuesday, January 26 at 8 PM EST/5 PM PST, TurboTax will be joining #MillenialChat to talk how to “Make This Your Best Tax Season Ever.” Join in and ask your burning tax season questions!