- February 7, 2018
- Posted by: Marshall
- Category: Taxes
Last Updated on
Its that time of the year, Tax Time. For many people and families its also a time that they will be receiving a large refund check from the IRS. According to the IRS, the average refund check was $3,050. The reason that you’re getting a refund check is that you paid more to the government that you were required to, and as a result you get a refund. For many families the refund check is the time that they do major repairs to the home or make a major purchase. Here are 10 Smart ways to spending your refund check this year.
- Pay Down Debt – Christmas has just past and maybe you spent too much, now is the time to pay down that debt. Even if you only pay off one credit card balance, you’ll be able to save that money going forward on a monthly basis. Paying down your debt also helps boost your credit score, when then allows you to refinance or get credit at a lower rate. It also helps you towards your goal of being debt free. If your behind on any bills, this is the time you want to catch up.
- Build a Savings Fund – There are times when not paying down debt makes sense, one of those times would be when you have no or little savings. The common suggestion is that you should have 6 months of expenses in cash. That way in case something happens to you or your family, you can then pull from your emergency fund. Say you or your spouse loses their job, you have a hard time making ends meet? If you have an emergency fund, you can then pull from that savings to make ends meet.
- Invest it – Is your debt low and you have a sizable emergency fund and some extra cash coming via the tax rebate. You may want to consider investing it. There are many ways to invest it in terms of different type of investment accounts available. Considering adding your tax refund to your IRA or Roth IRA is one way, investing in your kids 529 plan for college is another investment option. You can also investment it in the stock market by purchasing a stock, mutual fund or ETF.
- Home Repairs – Making repairs to your home is a smart way to spend/invest your tax refund. One if your home is in need of repairs there are times when if you get the repairs done early then it prevents further damage to the home such as leak roof. Also, if your planning on selling your home in the near future, upgrading your bathroom or kitchen will tend to give you a better return on the money you spend then many other home projects.
- Down payment on a home – Looking to buy a home? Use that tax refund as part of your down payment on your home. Its smart way to invest your refund because home prices have been increasing lately, you need to live somewhere and having your own home has tended to be a good long term investment, even when you factor in for the 2008 recession/home market crash. Additionally, the larger the down payment you make on your home, the lower the monthly payment will be.
- Education – There are a couple ways to go about this, one is that if your looking to further your career, or change careers you can use your take refund on going to school. Additionally, your school/education costs may be tax refundable so you may get that money all back next year. Another way to invest in education is through a 529 Education Plan if you have children, you can start saving for their college education. 529 Plans are also open to Grandparents, and your investment in the 529 plan may be tax deductible as well.
- Start a business – So you may be thinking that $3,000 is not a lot of money to start a business and your maybe right depending on the business that you’re thinking about. For example, a Macdonald’s franchise cost over $1,000,000 to start. However, there are many businesses that you can start for under $1,000. Include many online businesses that just require a website to get started. Now maybe the perfect time to get start your business.
- Donate it – Already have a savings fund, own your own home and don’t have any kids but still have a large refund coming back to you. Consider donating it, one it can help people in need. Depending on who you donate it to, the donation maybe refundable next tax year and you’ll feel good doing it.
- Travel – Want to visit a new city or State? Is there a place on your travel list that you really want to go an see, you may want to use your tax refund to travel. Having a couple thousand dollars will get your pretty far if your traveling, Also the benefit here Is that you get to go somewhere where you wanted to go, funded in part or completely with your tax refund which helps avoid going further in debt, which is always a positive.
- Buy Clothes – Maybe you need to update your wardrobe, having a few thousands can go a long way when it comes to getting clothes. Additionally, when you get your tax refund (February, March, April) many stores are getting rid of their winter clothes, often at steep discounts. Using that money to buy new clothes, especially if they are discounted at the end of the season is a smart way to spend your refund. Yes, you maybe buying a winter jacket in March and may not use it in that season but winter will be back next year and you’ll need a winter coat which you can get it discounted at the end of the winter season.
You don’t get many situations or times during the year when you get an extra few thousands. So, when it does come around such as now as a result of a tax refund, you want to use the money wisely, especially so if your working on getting out of debt or saving for something.
There are many ways to spending your tax refund, some ways we would consider smart such as paying down debt or going to school and further your education and some ways like buying a new TV we would consider not the best use of the refund you receive. It all depends on where you are in life, your situation and what your looking to accomplish.