7 great things to do with your tax refund
You may get all excited over the news of a tax refund. The amount that you are due to receive in a tax refund might seem like a tidy sum of money, but rest assured that with just a few wrong decisions regarding how you spend it, it will slip between your fingers like beads of fine sand.
With that said, we know that it is important to make the best use of your tax refund or it will be gone in seconds. This is why we have put together a post to advise you on great ways that you can put your tax refund to good use.
Before you get carried away with impulsive buying and spending, you should look into the following ways that you can maximize your tax refund:
- Beef up your emergency savings: Your tax refund is a great way to beef up your emergency savings fund. Regardless of the amount that you receive as a refund, a portion of it should be deposited into your emergency savings account.
- Maximize the impact of your tax refund by putting your refund towards one specific debt: It’s tempting to want to spread the money around and give a little bit here and there to every debt. Don’t do that. Instead, maximize the power of your refund and direct it towards just one debt using the debt snowball or the debt avalanche method.
– Debt snowball means that you have listed your debts from the smallest to the highest. And you’re working towards setting the smallest debt first.
– An Avalanche is listing your debts from the largest interest rate to the smallest interest rate. And you’re trying to knock out the largest interest rate first.
- Put it in a Roth or Traditional IRA: If you are struggling to start saving for your retirement, then this is a great option for you. Put your tax refund into an individual retirement account – an IRA.
– The traditional IRA means that you lower your taxable income, but you do have to pay the tax when you take it out in retirement.
– For the Roth IRA, you pay taxes on it today but you get to take it out in retirement tax-free.
The IRS can actually directly deposit your refund into your IRA instead of your bank account by using Form 8888.
- Put it in your HSA: Saving your money in your HSA is a great way to save for future medical expenses and to reduce your taxable income today. You can decide to split it up and have the IRS deposit some of the money into the HSA and some into the IRA.
- Face the repairs you’ve been putting off: It may be new tires for your car, replacing that old pair of jeans, or a couple of home improvements around the house, your tax refund can help final cover the costs of those things that you’ve been putting off replacing.
6. Invest: Check out your options for viable investment vehicles that will give you a good ROI. Index funds and mutual funds are two examples of some great ideas that you may want to consider.
- Expand your mind and your social Circle: Making friends as an adult can be difficult so joining classes and activities with other people as a social activity can be really helpful. You can learn to expand your social circle with classes like painting, or pottery. It will engage your mind in a different way, reduce stress levels, and what’s more, you get to meet a few new people.
We are a tax relief firm dedicated to giving you the best results regarding resolving your tax debts. Our team of qualified professionals is available round the clock to provide you with the assistance you need to overcome your tax debts and be well on your way to financial freedom. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].
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