For most of us, the end of tax season marks something exciting: our tax refund. While many Americans across the country will actually be paying the IRS money, those that do get money back should be smart about how they spend it. Whether you were expecting the money or are pleasantly surprised by your refund, don’t make any rash spending decisions. Instead, be smart about this money. Here are four great ways to spend it.
Pay Off Debt
Debt is a word none of us like to hear, but unfortunately, most of us deal with debt on a daily basis. Use your tax refund to try and get this word out of your vocabulary. If you have more debt than your tax refund amount, try to pay off (or at least pay down) high interest loans or credit cards first. While this may not be as glamorous as going on a shopping spree or buying a new television, it will give you a sense of relief that material things can’t buy.
Put It into Savings
If debt isn’t your concern, consider putting your refund directly into your savings account. Whether you are building your savings as an emergency fund, to finance a house, or for your kid’s college education, it’s always a good idea to have a hefty savings account. In fact, it is common practice to have at least six months worth of expenses saved up for emergencies, plus money for big expenses. You can work with an experienced accountant to help you put your refund into a savings account that is right for your financial goals.
Take some of that refund and invest it. Investments can be tricky, but if you do it right, you have the potential to make a decent amount more than what you put in. Speak with experts to lead you on the right path and be patient: making investments is a long term reward, not an immediate satisfaction.
Buy Something You’ve Been Saving For
If you feel your debt is in control and your savings account is large enough, it’s also okay to use your refund to buy something you’ve been saving for. Have you been dreaming of taking your family on a vacation? Or want to redo your kitchen? This is a great use of the money! Weigh your options but never feel guilty for doing something that makes you, and your family, happy.
If you have questions about your tax refund, or were unhappy with your previous year’s refund, contact the tax professionals at Levy Tax & Associates. Contact us at 1-800-TAX-LEVY or visit our website to learn more.