7 ways to use your tax refund to your advantage
Tax season is coming to an end and that means for a large chunk of us, we will be greeted by a lovely little tax return in our mailbox. If you are lucky enough to receive one, instead of spending it with wild abandon, why not use it to your advantage? Here are some useful ways you can use your tax return.
1.Pay off existing debt
Whether you need to pay off your credit card, put some money towards your student loan repayments or have an outstanding payday loan, your tax refund can be a great way to start reducing your debt.
The average interest rate on a credit card is around 11-15%, if you have a good credit, however many charge much higher rates. The same goes for other types of loans, all with varying interest rates. Therefore the sooner you manage to pay off your credit card bills and existing debt, the better.
2. Put it towards your emergency fund
In life, there are some things you just can’t plan for. Although we don’t want to think about it, at some point you may find yourself out of work, needing a major, unexpected repair, or forced to take extended time off work. One way to combat the financial stress in this kind of situation is to have an emergency fund. Ideally, an emergency fund should cover between three and six months of necessary living expenses. Consider paying yourself first and putting your tax refund can be put towards this, and help you top those funds up. While you may want the latest pair of sneakers right now, you’ll be glad you saved the money when your car breaks down.
3. Add it to your retirement fund
Although most businesses will have a company retirement fund for their employees, having your own individual retirement fund isn’t a bad idea. Whether you want to have your own savings, or create a joint fund with your partner, a personal retirement fund can be a great addition to your funds post-retirement.
4. Make home improvements
Have you been meaning to replace the dripping tap in your bathroom for months? Or perhaps you have always dreamed of shiney, new kitchen worktops but just haven’t had an excuse to splash out. Invest your money in your future by increasing your quality of living and give your home an upgrade with the money that comes in. Its a smart long-term way of using the cash.
5. Donate to charity
When you don’t have a disposable income, it can be hard to find the money to give to a charitable cause. However, your tax refund usually comes as a surprise and you can think of it as money you never had-a perfect excuse to give it to a charity of your choice. There is bound to be an organization that is lose to your heart, and donating some cash will not only help them out, but will also make you feel good. One aspect of good money management is sharing some of your wealth with those who are less fortunate.
6. Replace broken appliances
Similar to making home improvements, if you have a broken appliance at home that hasn’t been an urgent priority to replace, maybe now is the time. Having a brand new appliance-be that a coffee machine, fridge or washing machine-can improve your daily life and is a great way to invest in the long-term. Plus, if you opt for an energy efficient appliance you could be making savings on your monthly bills-result!
7. Invest in yourself
Have you been putting off important dental work, or maybe you are in desperate need of a new pair of running shoes? There is no harm in spending money on yourself if it is going to be something that benefits you positively for the future. Similarly, perhaps you have wanted to learna snews kill for a while, or pick up an extra qualification. These are the kind of things that don’t top our list of priorities when we have faced with bills and payments on a monthly basis, but thanks to a cheeky tax refund, you now have the excess cash to do something for you!
At the end of the day, your tax refund is money that you are entitled to, and as a result you can do what you want with it. However, consider making a smart choice with it and you may well reap the benefits in the future.