Next week brings April 15th, the big TAX DAY for most Americans. While the task of filing taxes brings much anxiety, most people (around 70%) still get a tax refund. That means many people will find in their bank account or mailbox a small lump sum that perhaps wasn’t already accounted for in the budget. What’s a family to do with a tax refund? Obviously, that’s a very personal decision, but here are 5 smart ways to use your tax refund:
1. Invest your tax refund
Investing your tax refund may not sound like fun initially, but it could become interesting with a little creativity. Since most new investment accounts require an initial amount to get going, why not use the tax refund to start that retirement account or education account you’ve been putting off for so long? Who says investing is strictly limited to retirement and education accounts? Perhaps now is the perfect time to invest in a business venture or buy a new stock. If nothing else, pad your savings account to provide even more confidence in your financial future.
2. Use your tax refund to pay down debt
I know, I know, paying down debt is just so boring! After all, whatever you might be paying off you already have it — so there’s no excitement about getting it now. However, there is no price for the freedom that a debt-free life can bring. If you check out debt-free pro Dave Ramsey, you’ll see that the most important thing to pay off first is your smallest debt. It’s all about the momentum.
3. Make a donation with your tax refund
Another smart way to spend your tax refund is to make a donation. From church to organized charities, there are endless opportunities to make a difference in some way. Often these donations qualify for tax deductions later as well, so it can be a win-win for everyone. Not sure how to get started with the right mission? This post from NBC News has some great pointers.
4. Remodel your house with your tax refund
Here’s where spending your tax refund can be smart: remodeling in your home. Home improvements almost always pay off in the long run. Granted, some tax refund checks are only a couple hundred dollars. Luckily, there are lots of home improvement projects or remodels you can do with that kind of budget. For inspiration, check out these 100 DIY projects for under $100!
You read all the time about people that go on strict diets only to sabotage themselves by over indulging later. The same thing happens to people with budgets. Getting too strict on a budget or cutting out all the small enjoyments from the financial plan starts to feel restrictive after awhile. Using your tax refund to splurge, in a smart and contained manner, can help ease up the pressure of frugal living. Naturally, this is only for those who have a strong savings track record and less debt. Maybe it is time for a family vacation or new wardrobe or just a fancy dinner. Of course, we still suggest smart planning and researching for the best deals!
How about you? What ways will you use your tax refund this year?