Every year, the average American looks forward to receiving their piece of the pie from Uncle Sam in the form of a tax refund. Many people mistake their piece as a free gift from the federal government, but in reality, it's been your own money all along! Essentially, you have overpaid in taxes, and the government is just giving you back what is already yours. Usually, this in the form of a large sum and because it's yours, you should spend it with care. Instead of spending your refund on high ticket items with little to no worth, how about making the value of your money stretch a little more this year? Continue reading for five great tips on getting the best return on your tax refund in 2019!
1. Pay Off Debt.
It may seem counterintuitive to use your refund to pay off something as tedious as debt. However, if you have high credit card balances, student loans, or a car payment, putting a large amount towards your balance can help you save some considerable interest in the future. The faster you pay off debt, the faster you can put the money from those payments towards other life goals like a down payment on a house, starting a business, or investing in the stock market.
2. Start an Emergency Savings.
Have you ever had a costly emergency come up and you immediately used your credit card to take care of it? Unfortunately, many Americans share this same mindset. Credit card debt can be a vicious cycle of maxed cards, late payments, and high interest rates. Do yourself a favor and break the cycle by using your refund to create an emergency savings fund. Being prepared for the unexpected will give you peace of mind and ease on your wallet.
3. Invest for Retirement.
Investing in your future is always a smart option when you come across a large sum of money. This is especially true if you work for an employer that provides a company match on a 401k. Never give up the opportunity of "free" money! If you don't receive a match or an retirement account at work, consider starting a traditional or Roth IRA.
4. Save for a College Fund.
If you have children or are planning on having children, putting your refund towards their college fund could really save them from the current ills of staggering student loan debt. Consider opening up a 529 plan, which offers two education savings options. In addition, some states may offer you a deduction on your income taxes, resulting in even more savings.
5. Invest in Yourself.
Self-improvement is a task we should take on everyday. If you have been looking to expand a side hustle into a full-time job, a hefty tax refund may be the thing to launch it from a hobby to a profitable business venture. Or if there are skills that you lack which is preventing a great promotion at work, use your refund and take classes to strengthen your knowledge. Always keep learning!
When it comes to your money, it's important to treat it wisely. A refund can make the difference in improving your future or putting you further into unnecessary debt. Be sure to read our other blog entries for more tips on smart ways to spend your money today!