Have you filed your taxes yet? Dan and I filed a few weeks ago and are deciding what to do with our refund this year. Since we get it automatically deposited into our checking account, it is really easy to spend it without thinking about it. This year, we are going to have a plan! According to MyBankTracker.com, here are some of the best ways to use your tax refund this year.
1. Build your emergency fund
One of the first things to do with your extra money is to build an emergency fund. You don’t want to go into credit card debt when an unexpected expense comes up!
Expert tip: online savings accounts tend to have the best interest rates, so consider creating your emergency fund in one.
2. Pay down your debt
Do you and
3. Fund your IRA
It is never too early to start planning for your retirement. Use your tax refund to open or add funds to an IRA. Bonus? It will help to reduce your tax bill for next year.
Already maxed out your IRA funding for the year? Consider buying individual stocks/bonds.
Expert tip: buy low-cost index funds that track the stock market as a whole. While you won’t beat the market, you will match it.
5. Pay for
Do you and your spouse own your home? Add value to it with a home improvement project. Your tax refund can help you get started on that kitchen renovation or bathroom remodel.
6. Replace an inefficient appliance
Older appliances are less efficient than newer ones. Use your refund to replace that old refrigerator and you could save you hundreds of dollars a year in electricity use.
7. Invest in your career
Use your refund to get a certification or further your education. This could help you get a promotion, pay increase or even a new, better paying job!
8. Save for a future expense
Considering getting a new car? Or maybe you know you will need new living room furniture soon? Put your tax refund in a savings account to have money ready when the time comes.
9. Make a charitable donation
Why not donate some or all of your tax refund to charity? Not sure where to donate? Use an organization like Charity Watch, an unbiased charity watchdog, to research potential charities.
10. Buy something fun
While investing your tax refund, or using it to pay down debt are the most beneficial ways to use your tax refund, treating yourselves can also have benefits! Buying something fun can help you both relieve stress and may help you avoid the temptation of spending on other things in the future.
Although it can be fun getting a big tax refund every year, it actually means you gave the government an interest-free loan. They kept your money over the year instead of you investing it, paying down your debt, or buying something you may want. Try using the IRS Withholding Calculator to get your refund as close to $0 and you can use the money throughout the year instead.
Our tax refund decision?
After reviewing our options, Dan and I have decided to put half of our refund in our emergency fund and the other half in an IRA