4 Smart Things To Do With Your Tax Refund

4 Smart Things To Do With Your Tax Refund

by Mar 21, 2019Financial Planning

Last year, the average tax refund was $2,899. For most households, that’s a sizeable amount of money that can be put to good use. Regardless of if you’ve already gotten your refund or are still waiting for it, it’s a good idea to have a plan for it.

The following four ideas are a smart way to use your tax refund if you’re trying to be financial responsible.

1) Pay Off Debt

While paying off debt is obviously the least fun option, it can have the biggest long-term impact on your financial goals. Consider paying off debt on things like:

  • Credit Cards
  • Student Loans
  • Mortgages
  • Car Loans

If you decide to do this, make sure the money goes towards paying down the loan principal, not just the interest on the loan. Paying down your loan principal will reduce your total loan payments.

2) Save For Retirement

Depending on where you’re at in life, saving your tax refund for retirement may or may not sound like an exciting idea. Unlike paying off debt however, at least the money you put away is for your own benefit.

If you have an employer-sponsored retirement plan (like a 401(k), for example) consider using your refund to help maximize your contribution for this year. If you’re self employed, there are a number of options available for retirement planning to consider as well.

3) Start A Financial Goal

Have you been dreaming about a new car? Maybe a trip to Hawaii? Your tax refund is the perfect opportunity to start saving for a big financial goal.

Whatever your goal might be, setting aside money for it is the first step. If your goal is short-term, meaning you think you may need to access your money within a few months or years, consider putting your goal money into a high-yield savings account, where it’ll be easier to access when you need it.

If you’re saving for something long term, like a down payment on a bigger home you may want to buy in the next 10 years, consider saving for it in an investment account, where your money can potentially grow faster with the help of the markets.

4) Live A Little

You read that right: go ahead and live a little with your refund. There’s no law that says you have to save every single penny.

Spending some of your tax refund on something fun is a great way to celebrate and treat yourself. It can also help motivate you to focus on other financial goals.

Talk With A Financial Planner

If you’re not sure what the best way to spend your tax refund is, it may be worth your time to speak with a financial planner.

Saving money, planning for retirement, and paying off debt are often easier said than done. If you struggle with money management, that’s okay – there are people who can help you start building good habits.

At Miles Brown Asset Management, we help people at every stage of life to achieve their financial goals. To learn more about how we can help you, please contact us today.

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