Tax refund season is coming! For many of us that means we begin dreaming of vacations, new cars, or other extravagant items that we may not normally spend money on. However, instead of viewing this as throw away money, you should consider using one of these smart ways to use your refund.
Spending your Tax Refund Wisely
- Put into savings for a rainy day – It might not seem like a very fun thing to do with your tax return, but adding money to your rainy-day fund can be a very smart option. You never know what might occur in the future, and having some funds to fall back on can be a saving grace. Whether you need money while recovering from surgery, emergency car repairs, or other hardships that can occur, having a small nest egg will be a huge help.
- Pay off credit card debt – Paying down your credit card debt can help boost your credit score. Keeping those balances low will only increase the ratings that you will get from the credit agencies. By paying down or eliminating credit card debt, you can begin working toward buying a house, a new car, or other large purchases that you might be considering down the road.
- Pay down student loan debt – No one loves student loans. These are the dreaded loans that we know are going to be with us for many years to come. However, by putting a decent amount of money into one or more of your loans, you can pull that principal balance down (or pay it off entirely), giving you significant savings on the interest. One piece of advice – find your lowest balance and put money on that first. Once it is paid off, move to your next lowest balance.
- Invest – By using your tax refund to invest, you can begin to build a more substantial retirement fund. If you are not familiar with the stock market or are not sure where to begin, you can get with a broker who can advise and guide you to making the best decisions for your family and your money.
- Begin thinking about retirement – While we already touched on this with investing, retirement can sneak up on you. If you are not properly prepared for retirement, you might find that your monthly income is not enough to continue the lifestyle you want. Create a list of what your goals for retirement, and figure out what monthly income you are going to need to supply that. Along with investing, and interest-bearing bank accounts, you can begin to build a better retirement fund, and ensure that after you are finished with active service, your family is still maintained and cared for.
- Add or buy life insurance – Life insurance is not one of the areas we care to think about, but it is important. The amount of life insurance that you have should be able to pay off any large debts, send children to college, and help maintain a family if something should happen to you or your spouse. These needs are going to change depending on circumstances. Will you need to hire long-term child care? Pay off remaining college debt or mortgages? Will the amount be able to maintain your family while they adjust and move forward? These questions are not fun, but they are necessary. Adding to your current policy, or purchasing a new one can give some peace of mind to the “what if” questions that no one wants to think about.
- Put toward long term goals – Are you saving for a house or new car? You can put your tax return to work by finding either short or long-term interest-bearing bonds or savings accounts to help grow your money. Long-term goals, such as that retirement travel fund, or planning on the eventual upgrades of vehicles and lodgings, these interest-bearing accounts can help you grow your money faster.
- Use your money toward certifications or higher education – Investing in certifications or higher education courses can help move your career, both in the military and the civilian sector forward. Instead of taking out student loans, you can use your tax return to pay for a couple of classes or certifications for your chosen career field. Whether a college or trade school, these classes can help build your skills and portfolio, making you a stronger candidate as you move forward in your occupation.
- Renovate or update your home – We know in the military that you are never in one place for long periods of time. Eventually, you are going to come up on orders to move. If you own your home, using your tax return to renovate or update sections on your home can make it easier to sell when the time comes. Kitchens, bathrooms, flooring, and paint are some of the first things that are noticed when homes become available. By presenting your home, updated and current, the chances of selling or renting faster become stronger.
- Pay down a car or mortgage – Debt is hard to have, but by paying it down with your tax return, you are reinvesting your already hard-earned money in your daily life. Pay ahead on your mortgage or knock that car payment down faster. Once they are paid off, that is just extra money in your bank account each month. With the new funds, you can add to any of the above options that you have, or look to begin investing for your future.
Smart Moves and Money
We all want to get the most for our money. By using the ten smart ways to spend your tax refund, you can make your return go a little farther. Instead of that new phone or television, these tips can help decrease your debt, or help get set up for life insurance or retirement. Getting started is often the hardest part. Contact us today and find the answers to all of your questions! Make this tax season your best yet, and let your tax refund help make some smart moves this year.