Getting big tax refunds from Uncle Sam can turn the frowns of just about anyone to a smile. The average tax refund this year was about $3000 which is a lot of money. However, it is important that you use your tax refunds wisely. Rather than splurge and destroy your credit totally, you can use your tax refund money in ways that can help you build wealth. This means that rather than visiting the mall on a shopping spree, you can pay off your debts or invest. In this article, we will discuss the different ways to use your tax refund.
Pay Off Debts
Generally, debts of any kind are bad but credit card debts are worse because of the interest that compounds against you monthly. Paying off your credit card debt is the best thing you can use your tax refund for as lugging this high interest debt around will affect your credit score adversely. When you pay off your credit card debt or a part of it, your financial debt burden will reduce and your credit score will have a chance to recover. On the other hand, if you don’t have any credit card debts, you can pay off other financial obligations like student loans and others.
Get an Emergency Fund
One thing an emergency fund does is give peace of mind. You can sleep better knowing that you can cover any unexpected expenses. An emergency fund is ideally supposed to cover three to six months living expenses. However, if you can’t make up to that, having a $1000 emergency fund is still better than having none. So saving your tax refund to build your emergency fund is a good way to use it – you’ll be grateful to yourself when an unexpected expense happens.
Investing in yourself is a good way to take full advantage of your tax refund. You are your greatest asset so investing in your talent and skills is a good way to add value to yourself. Learning a new skill or taking a course will have great returns in the long run – either in form of increase in income or value added. So, rather than buy those shoes you’ve been eyeing, why don’t you invest in your skills and expertise for greater returns?
Investing your tax refund is a good way to grow your wealth. Stock investment is the next thing to do with your tax refund if you are debt free and financially stable. There are different financial professionals available to help you make the best decisions when investing. This way, you can see your money grow with interest.
Wrapping It Up
There are several other ways you can use your tax refund like starting a savings account, charity, home improvements, and others. Despite this list of financially wise options stated above, you can still spend your tax refund on some things that you love. Spending your tax refund doesn’t necessarily have to be boring.
If you are in debt and do not know what to do with your tax refund, you should talk to a debt counselor. Elias Dsouza of Dsouza Legal Group is one such debt counselor. Contact Elias today for a free consultation.