If you’re lucky enough to be getting a tax refund this year, put it to good use! There are many choices we can make with this extra lump sum of money.
Choosing a few wise investments are always recommended by experts. Consider one of these!
- Pay down, or pay off a credit card. If you’re paying a high interest credit card with only the minimum monthly payments, sending a large amount to pay it off completely, or cut it in half at least, will help you save on monthly interest fees. If you can’t pay it off all at once, lowering it will allow you to pay the credit card off sooner if you continue to send decent size payments. Paying off debt lowers your debt ratio, can improve your credit score, and frees up your monthly income for other things. Most people say paying off their debt was one of the most freeing things they have ever done. Imagine having no car loans or credit card payments?
- Pay one extra mortgage payment. Each year with your tax refund, sending in a 13th payment will make an enormous difference in your mortgage over the course of the loan. Not only does this extra payment save you on interest during the 20 or 30 years, but it will also help you pay off the mortgage faster. A double win. A little tidbit here; Some experts recommend sending 1/12th of your mortgage extra each month toward principal, so at the end of the year, you’ve paid a full extra mortgage payment too.
- Add to, or open a savings account as an emergency fund. Financial experts say we should have 3-6 months of living expenses put away “just in case”. This gives you a little cushion and less to worry about.
- If you’re saving for your child’s college education or have a 529, add money to it from your refund. You’ll give yourself a nice pat on the shoulder when your kids head off to college.
- Put some money is a CD. They pay slightly higher interest than traditional savings accounts. You can’t touch them until they mature so if you are one to dip into savings account too often, this can help you keep money and earn interest too.
- Consider using some of your refund for any needed house repairs. Buy a new roof or new windows. Upgrade plumbing. Not only will this make your house look better and be safer, when you go to sell, they’ll need to be done anyway.
There are many ways we can use our refunds wisely. We are all in different situations but at minimum, try to use 3/4 of it in ways that will help you over the course of time, such as paying down debt or saving for college. On a personal note, I always also use a small part of mine for a family vacation. No one recommends spending it all on vacation, but hey, this is life and if the kids are living at home and you didn’t travel in the last year, I think a little trip is in order.
What are you doing with your refund?