While everyone dreads the annual tax deadline, there are people who actually look forward to it because of the refunds. Before doing impractical impulse buys, take note of the following options so you can use the accumulated savings you had in the previous year to bring you peace of mind and better financial security for many years to come.
Pay Off Your Debts
Do you have credit card debt with high interest rates? Pay it off using your tax refund to enjoy significant returns. Know that when you lower the credit card debt balance, the finance fees and interest on that debt will likewise go down.
Invest your Tax Refund in Real Estate
If you do not have your own house but are planning to get one and have a significant tax refund coming in this year, considering adding it to finance your home. Alternatively, if you already have a mortgage like an FHA 221d4 loan, pay off the principal early to save on interest. Check with your lender if they allow advanced payoff for your specific loan type.
Consider an Emergency Savings Fund
If you don’t have any kind of debt, put your refund into an emergency savings fund. This special account will enable you to pay for any emergency expenses like unanticipated medical bills or being fired from your job.
Save for Your Future Retirement
If you have a significant amount saved up and don’t have any debts, secure your financial condition further by using your refund for a Roth or traditional Individual Retirement Arrangement (IRA). Check with the IRS first if you qualify for this.
Save Up for Your Children’s College Education
It’s always a good idea to have an early head start when saving up for your kids’ college education. The earlier you begin, the more you save since sufficient time and compound interest will help in doing the majority of work for you.
Although none of the abovementioned options is as exciting as an overseas trip, a brand new entertainment system, or renovating your home, giving yourself greater financial security will be more rewarding since you can reap its benefits for longer.