With tax season right around the corner, many people are already anticipating getting their tax refunds back from the federal and state government. Last year the average federal tax refund was $2700! While getting a large amount of money as a tax refund is great, what should you do with that money? You might be tempted to splurge and buy a brand new flat screen TV, or take an expensive luxury vacation, but Morgan & Morgan does not recommend that! Instead, we have come up with 5 smart ways to spend your tax refund.
Here are the top 5 ways we recommend spending your tax refund:
5) Make Home Improvements – Do you need to have repairs done on your house? Do you have outdated non-energy efficient appliances? Using your tax refund to make home improvements can raise the value of your home and decrease the amount of your utility bills.
4) Repair your Car – Having reliable transportation is a requirement for almost every job. If your car is having problems, you can use your tax refund to make repairs to your vehicle. Putting off car repairs often leads to even more expensive problems later. Also, some repairs might make your car more fuel efficient, which means you will save money at the gas station.
3) Pay Off a Credit Card – If you have a credit card or other debt with a large balance and high interest rate, you can use some or all of your tax refund to pay off that debt. Credit cards and other debts that carry a high interest rate increase more rapidly than those with lower interest rates. Paying off debts with the highest balance and interest rates can help you achieve a goal of having little or no debt quickly.
2) Invest in Yourself – Have you been considering going back to school or obtaining training and certificates related to your line of work? Using your tax refund money to further your career is a great way to invest in yourself. Additional education or training can advance your career and increase the amount of money you are earning.
1) Start an Emergency Fund – If you already have an emergency savings fund, that is great! Could you use even more money in your emergency fund? A tax refund is a great way to fund or even start an emergency savings account. Every person should have an emergency fund. Most financial advisers recommend having six months salary saved. This will help protect you in the case of losing your job, getting sick, having your car break down, or any other unforeseen circumstances.