Whether you choose to have your tax refund deposited directly to your bank account or check-mailed to you, that year period where you receive your tax refund can be an exciting one. According to Businessinsider, the minimum tax refund is up to $2,711. Interestingly, repayments might get increased due to the interest being paid by the government as a result of the coronavirus pandemic, which delayed refunds.
But before you engage in an outing spree or a dinner night with your ±$3000, you’ll want to spend your tax refund maximally on yielding investments. Instead of spending lavishly on excessive goods and nasty activities like gambling, here are five smart ways you can spend that seemingly gifted cash in a manner that’ll give you the best returns.
1. Pay Your Outstanding Debts
Now that you have your tax refund, consider prioritizing the payment of your debts. When you pay up your debts, you’ll focus on other investments without worrying about interests’ accumulation. For example, if you’re using a credit card that charges a high-interest rate, it would be best to pay your outstanding balances with part of your tax refund.
Interest fees from credit cards can accumulate quickly and become a nightmare. If you don’t have an outstanding credit card debt, you can commit your tax refund to other financial duties such as loans and bills. Paying off your debts will also save you the physical, emotional, and psychological stress that accompanies the pilling of financial obligations.
However, depending on how tight your budget is, note that you don’t have to commit all your tax refund to pay your debts. You can dedicate some substantial amount for debt payment and utilize the remnants in other ways.
2. Save Some Money
Stephen King says, “there’s no harm in hoping for the best as long as you’re prepared for the worst. You can do yourself lots of good by saving some money you can tap during an emergency. Keeping some funds worth three months’ income can help you manage unexpected events such as an unforeseen car breakdown, house equipment spoilage, sudden medical expenses, etc.
You can label these funds “emergency fund” and save in a high yielding savings account, which has more interest rates than traditional accounts. Similarly, apart from emergency funds, you can also save money for necessities such as a summer camp, or your spouse’s birthday gifts. Keeping cash from your tax refund will allow you to utilize your basic income for other relevant uses, thereby giving you more financial freedom.
3. Build Yourself and Improve Your Home
After you’ve paid your debts and saved some chunks, then the next necessity is building yourself up by investing yourself. Perhaps you’ll earnestly desire to take up a self-development or a college course; this is the right time to do so. Invest in healthy commodities that’ll boost your health, such as weight loss and energy building. Consider reading comprehensive reviews on ketones diets to know which should you pick, and the needed healthy ketogenic on the initial phase.
You can also learn a new skill such as cooking or crafts skills. Consider buying books relevant to your job that will make you perform better at your profession. And after you’ve invested in yourself, then consider improving your house as the next item on your budget.
Your house is a part of your life, and one of your most valuable assets. Thus, treat it as such. You’d not want your home to develop costly damages later, so consider repairing minor breakdowns that can depreciate further such as a broken water tap.
4. Make Some Stock Investment
With your emergency funds and sound investments in yourself and your home in place, consider opening a brokerage account, and begin ventures with your tax refund. You can invest in a beginner company such as a tech start-up in which you’ve got a great deal of confidence.
And consulting a financial expert or using an investment tracker is also essential to evaluate your stock’s performance. Allocating part of your tax refund for investment purposes can save you the burden of taking calculated investment risk and yield long-term profits.
5. Charity, Charity, Charity
Investing in yourself, saving some money, and investing in stocks are great, but don’t forget to give some of your tax refunds for charity. Depending on your expenses, you can allocate a token amount for this purpose. Giving part of your money away has the potential to make you happier, self-confident, and fulfilled. And you can always claim the charitable donation tax deduction if you engage in charity.
Conclusion
Most people erroneously treat tax refunds as gifted money by the government, which isn’t supposed to be. Your tax refund is part of your hard-earned income, and not just extra cash. Therefore, make your money purposeful; invest only on things that count.