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Of course, not everyone gets a refund, but if you are expecting one, you may be wondering what you should spend it on first. Many people opt to treat themselves to something they wouldn't otherwise buy. Occasionally this is a nice thing to do, but from a practical sense, it is probably a good idea to prioritize and look at the alternative ways to spend tax refunds.
7 Ways to Spend Your Income Tax Refund
1. Pay Ahead on Debts
Tax returns are an excellent opportunity to pay down outstanding monies owed. If you have credit card, medical or other miscellaneous debts, try to pay those bills off and get them out of the way. Tax refunds are a great occasion to financially get ahead.
Why not pay extra on a mortgage, car or student loan? Over the course of time, paying towards the principal of your loan will save bundles of money. If you have credit card debt, use your refund to pay it down. The average U.S. household owes $6,849 in credit card debt. This equates to an average of $1,162 in annual interest.
There is little sense paying additional fees or interest on money already owed when you have an opportunity to get it all paid off. It is less monthly maintenance to worry about and more money in your pocket to use for other things.
Been waiting a long time to replace that hot water heater? Stove or washing machines been on the fritz? Refrigerator ready to retire? Why not use some of your tax return to replace much needed big ticket items. You could always buy them on credit, but then you're paying out interest and having another consistent bill every month. Again, this is all money you could theoretically have back in your pocket monthly to use for other things.
One good way to spend tax return money is to invest it to make more. However, before doing this it is important to either do the research, understand the risks and get a good pulse on investing. Another option is to find a good brokerage company to assist you with investing.
Most people look forward to an annual break, especially if they've got some vacation time coming up, but no money to spend. A tax return is a perfect opportunity to buy yourself and/or your family a nice vacation.
Be as frugal or elaborate as your refund allows. What's most important is the vacation doesn't get put on those aforementioned credit cards because it negates the intentions of trying to get ahead. You don’t want to put yourself in debt.
Depending on how much your refund is, a fun project is to remodel a room in the home. Consider refacing your kitchen cabinets or replace that dingy old carpet you've been itching to get rid of. These expenses are not something typically factored into a monthly budget, and a tax refund is a great way to plan out for these kinds of expenses. In the process, you can increase the value of your home which isn’t a bad ROI for an investment of your tax return.
Whatever you decide to do, it's a good idea to try and file your return on early and get the money sooner. The faster you file, the quicker you'll be able to pay, invest, or spend your return! If you're unsure of how you want to spend it, you can always save it for a rainy day . . .
There is little sense paying additional fees or interest on money already owed when you have an opportunity to get it all paid off. It is less monthly maintenance to worry about and more money in your pocket to use for other things.
2. Replace Appliances or do Home Improvements
Been waiting a long time to replace that hot water heater? Stove or washing machines been on the fritz? Refrigerator ready to retire? Why not use some of your tax return to replace much needed big ticket items. You could always buy them on credit, but then you're paying out interest and having another consistent bill every month. Again, this is all money you could theoretically have back in your pocket monthly to use for other things.
3. Invest
One good way to spend tax return money is to invest it to make more. However, before doing this it is important to either do the research, understand the risks and get a good pulse on investing. Another option is to find a good brokerage company to assist you with investing.
4. Vacation
Most people look forward to an annual break, especially if they've got some vacation time coming up, but no money to spend. A tax return is a perfect opportunity to buy yourself and/or your family a nice vacation.
Be as frugal or elaborate as your refund allows. What's most important is the vacation doesn't get put on those aforementioned credit cards because it negates the intentions of trying to get ahead. You don’t want to put yourself in debt.
5. Remodel
Depending on how much your refund is, a fun project is to remodel a room in the home. Consider refacing your kitchen cabinets or replace that dingy old carpet you've been itching to get rid of. These expenses are not something typically factored into a monthly budget, and a tax refund is a great way to plan out for these kinds of expenses. In the process, you can increase the value of your home which isn’t a bad ROI for an investment of your tax return.
Whatever you decide to do, it's a good idea to try and file your return on early and get the money sooner. The faster you file, the quicker you'll be able to pay, invest, or spend your return! If you're unsure of how you want to spend it, you can always save it for a rainy day . . .