Tax season is one of the most highly anticipated seasons of the year as many anticipate the arrival of their income tax refund.
Statistics show that the average tax refund in the United States is around $3,000. That’s a pretty decent chunk of money for many people, and it can actually be used to make a real difference in your financial future.
Not sure how to put your tax refund to good use this tax season? Major League Mommy has got you covered. Here are 8 smart ways to use your tax refund for financial success.
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Smart Ways to Use Your Tax Refund
1. Get Caught up on bills
If you have been behind on bills, you should use this extra money to get caught up. This should actually be one of your first steps. If you really want to heal your finances, you have to get your current financial obligations in check. There is nothing wrong with doing so.
Yes, we want to get to the good stuff like investing and buying that one item we’ve really been wanting. But trust me on this one. Getting caught up on any bills you are behind on is one of the first moves you should make.
2. Fund Your Retirement Account
Investing is one of several smart ways to use your tax refund. When it comes to the concept of investing, investing in your retirement should be a top priority. You can use your tax refund to make a one-time contribution to your IRA or use it to increase your current contributions. If you are not yet investing money into a retirement account, now is a good time to get started.
3. Pay Down High-Interest Debt
If you have high-interest debt, your tax refund can be used to help you get out of debt faster. Consider using your tax refund to pay down your credit cards or any other high-interest debts. With the extra funds on hand, this is the perfect opportunity to do so.
4. Start an Emergency Fund
I’m sure you’ve heard this a million times, but an emergency fund is essential for financial security. You can use your tax refund to get your emergency fund off the ground or to add to an existing fund. For the best results, I always recommend setting up your emergency fund in a high-yield savings account or another place where your money can earn interest as it sits.
5. Start Investing in stocks
Investing can be a great way to grow your money over time. Consider using your tax refund to open a brokerage account or to purchase individual stocks or mutual funds. If you’re looking to get your feet wet and learn more about investing, you can use apps such as Acorns to get started.
6. Invest in Your Home
Investing in your home can help increase its value and make it a more comfortable place to live. Consider using your tax refund to update an area of your home, or to make other much-needed home improvements.
If you don’t yet own a home, you can invest in the purchase of your future home by setting money aside for the big purchase.
7. Invest in Education
Investing in education can help you or a loved one develop high-income skills, and really set you up for a financially successful future.
8. Start a College Fund
If you have children or are planning to have children, starting a college fund is a great way to use your tax refund.
You can use your tax refund to start a 529 plan or other college savings account and start saving for your children’s college education.
Hopefully, these ideas have given you a bit of guidance as to which moves you should make with your income tax refund.
By making the right moves with this extra money, you can set yourself up for financial success so that you never need to rely on a tax refund again.
