\"Quantcast\"/

Use Your Tax Refund to Get to a Better Place Financially

 

Nobody looks forward to filing taxes because it often takes a while to do and the amount that’s returned isn’t always what was expected. But still, receiving that refund can be especially important for boosting your finances over the short-term and long-term. How so? Instead of spending that refund money on some luxury items, consider the following uses for it that can pay off down the road.

Use It To Contribute Towards Your Future

If you’re still in your 20s, 30s, or even early 40s, retirement probably isn’t the first thing on your mind. Yet many people who’ve made this mistake have had very rocky transitions into retirement by either having to retire later than they should have or running short on retirement savings. That’s why you should be doing everything you can to maximize your retirement income now and actually plan for a larger nest egg than you think you might need.

You might already be making contributions to a 401(k) or IRA, but think of how much better they could be with a tax refund added. If you’re looking to do even more with that tax refund amount for your IRA investments, you might want to look into buying 52 week high stocks, or see if dividend stock buying and reinvesting could be an even better move for your portfolio. While retirement investing probably shouldn’t take precedence over immediate savings needs, remember that putting your tax refund savings in these kinds of funds is a way to grow it that can overcome inflation and the shortfalls of savings and CD accounts.

Use It to Pay Off Debt

Probably life’s biggest expense that gets forgotten is debt, especially if it’s credit card debt. But when you suddenly run into a large amount of money like your tax refund, you should use that to pay down outstanding debt. Credit card debt should probably be first on that list because it is the highest interest debt. But student loan debt is also important to pay down as soon as possible, or perhaps you have that car that you’re hoping to pay off before all that interest adds up. While you do have to be careful in some instances not to get hit with prepayment penalties on debt like auto loans and mortgages, reducing the principal and interest as much as possible will save you a lot on debt expenses in the long run.

Contribute It to an Emergency Fund

If you don’t have any pressing debts at the moment, you should be saving money for occasions when you need it immediately. This doesn’t mean saving money for those routine home or car maintenance costs, but saving for when you really need an immediate repair when things break down or when you suddenly have to visit the emergency room. Experts always recommend setting aside a certain amount of money each paycheck to contribute to emergency savings, but putting your tax refund into it could really help grow it. And the more you can grow your emergency savings fund using your tax refund now, the less likely you’ll need to ask friends or family for money down the road or go the even worse route of using a predatory loan to pay for emergencies.

Use It to Pay Insurance Premiums

Another way to either protect yourself from high-cost emergencies in the future or be set for various needs today is to make sure you’re insured. While auto insurance is required if you’re a vehicle owner, maybe you hadn’t thought of other insurance policies such as renter’s insurance or life insurance. And even your own personal health is something you should be investing in such as making that trip to the dentist when you’re supposed to, or even having children’s doctors visits covered.

The point is that there are actually quite a few types of insurance out there that can protect you, your loved ones, and your property that don’t cost as much as you might think. Using your tax refund to pay into them initially, or pay current premiums off, could be one of your more important decisions.

Whatever you decide to do with your refund, make it work for you in the best possible way. You will be glad you did.

About Kimberly

Kimberly Vetrano resides in the suburbs of New York City with her family and "mini zoo" consisting of five cats, a dog and a Goldfish. Kimberly is a teacher's assistant for a Kindergarten class. When she is not working or blogging, Kimberly enjoys taking photos of nature and hanging out with family and friends.

Speak Your Mind

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.