During tax season, it’s easy to get caught up in the excitement of that coveted tax return. Many wait all year long for the chance to cash in those federal and state returns to spend some extra money they normally wouldn’t have within their reach.
While you should feel free to spend your money however you choose, there are plenty of smart things to do with your tax return than blowing it all on a new wardrobe. You only get your tax return once a year, so why not spend it in ways that will strengthen your financial stability or improve your everyday life? For your benefit, here are eight
great ways to spend this year’s tax return.
Just because you got back some cash, it doesn’t necessarily mean you have to spend it. While you should be contributing to your long-term savings account all year long, making a greater contribution from your tax return could significantly improve it. This is especially true for those who find themselves not saving as much as they should throughout the year. Not to mention, by doing so you’ll make it a lot less painful saving funds from your yearly income for the rest of the year.
Make Larger Credit Card Payment
Getting your tax return is a great opportunity to triple the payments or paying off your credit cards balances. When considering the interest rates many of these cards carry, it'll end up taking years to pay off your debt, so why not take advantage of a few extra funds to help you get down those mounting balances? You’ll thank yourself later.
If you have children, nephews, nieces or godchildren, why not make a selfless act of putting your tax return into a college fund? While it may be tempting to spend that money on something new to add to your jewelry collection, the future education of a young person you love has a far greater impact. You can also put it into a fund for yourself if you’re in college or plan to enroll.
Put It Into Your Retirement
Sadly, the average American adult has less than $25,000 in their savings account. You’ll thank yourself in the long haul if you start making larger contributions to your retirement. Stash your refund in a traditional IRA or another tax-deferred account, like a 401(k) or 403(b), and you’ll also pick up a tax deduction on next year’s returns. Just to give you an idea: if you put a $2,000 refund into a retirement fund that earns 8 percent annually, it will be worth more than $20,000 in 30 years. While it’s easy to live in the moment, you should always think about the future.
If you’re going to spend your tax return, you should purchase things that will save you money in the long run like a coffee maker instead of buying Starbucks every morning, or instead, spend it on something you normally wouldn’t get an opportunity to do like making improvements to your home or your car. Whatever you decide to do, spend smart.
Invest In Your Health
You can save a lot of trips to the doctor if you use your tax return to invest in your health. Buy a yearly gym membership and treat yourself to a brand new workout wardrobe and equipment. If you don’t have health insurance, sign up for a high-deductible plan and start a health savings account with your refund. You’ll be prepared if an emergency arises.
Take A Class
If you’re looking for a promotion at work but don’t yet have the skills, consider investing in classes that will give you the certifications you need for that coveted job title. This can also be useful if you’re planning on changing industries.
Give It To Someone In Need
Sometimes people tend to spend just because they have it and not because they actually need it. If you fall in that category, maybe you should share your tax return with those who actually need it. Whether it’s a family member or a friend, giving sometimes feels a lot better than receiving. You could also donate money to your favorite charity or make a contribution to your local church or even your former college or university.