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How to Be Smart About Your Tax Refund

By on May 15, 2019
How to Be Smart About Your Tax Refund

Hopefully, this year’s new tax code has been good to you and you’re the proud recipient of a sizeable tax refund. Before you start buying rounds for the entire company at happy hour, it’s time to put a little thought into how to make this money last.

Rather than thinking short term, now is a great opportunity to be smart about your tax refund and invest it to grow more wealth in the future. How can you pull this off? It’s actually much simpler than you think. Here are five ways to leverage your refund for long-term success.

Pay Off Your Current Debt

If you owe money to a creditor who’s not your best friend or parent, there’s probably interest on it. Fighting a losing battle against compound interest is no way to go through life, so the best thing you can possibly do if you still have debt is to eliminate it when you have some spending money. Even though this isn’t technically an investment, it’s resolving an outstanding debt that will grow until you pay it down. This move isn’t as fun as a new purchase but wisely ensures that the money you do make in the future is secure.

Make Home Improvements

Congratulations, you’re a homeowner! Wasn’t that kickback from the government on your taxes nice? Before you go and spend it all in one place, think about how much equity it could add to your home if you were to turn your tax refund into a new partition or upgraded bathroom. Those concert tickets you wanted to buy won’t be worth much in five years from now, but new hardware sure will. If you can use the money to fund a DIY project, that’s even more cost-effective in the long-term.

Start an Individual Retirement Account

Many workers are fortunate enough to have a 401K or retirement account of some kind through their employer. Matching contributions are a great start, but with the way Social Security is looking, it might not be enough to get you by when you retire. Consider putting your tax refund toward your 401K or another retirement account as an investment in your future. If you’re looking to diversify your savings, you can open one of several individual retirement money management options to ensure that you’ll be able to continue enjoying your quality of life when you stop working.

Buy Stocks or Commodities

Playing the stock market is no simple thing, as it’s always carried an inherent level of risk. However, if you’re fairly financially stable, there is still an opportunity to make money buying stocks, bonds or other traded products. If you’re really feeling adventurous, you can even consider getting in on the recent crypto-currency fad. We’re not endorsing unwise choices, however. The best idea is to evaluate your appetite for risk and invest accordingly. But as they say, “no risk, no reward.”

Get Educated About Your Tax Refund

Receiving your tax refund gives you a variety of options, both fun, and not-so-fun. If you’re looking to make smart financial moves, however, why not put that money towards a purpose?

Each of these unique options will serve you much better in the long run than the tempting shoe sales and car deals that roll out around this time of year to steal your attention. That money will go faster than you think if you’re not careful, so put it someplace safe and invest in yourself. When you look back, you won’t be sorry that you missed out on a few fancy dinners.

Scott Huntington is a writer from central Pennsylvania. He enjoys working on his home and garden with his wife and 2 kids. Follow him on Twitter @SMHuntington

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