With tax time quickly approaching it’s a good idea to plan out what you’re going to do with your income tax refund. You can easily go online now and get an idea of what you’ll get back in taxes.
It’s always nice to receive a lump sum of money at the beginning of the year but if you aren’t careful your money can disappear as fast as you get it. If you plan on receiving an income tax refund this year here are four ways to make the most of your money.
Start an Emergency Fund
If you don’t have an emergency fund receiving a large sum of money via an income tax refund is a great way to get started.
At times it can be tough to maintain enough patience to let money add up a little at a time. By using your income tax refund to fund your emergency savings you get instant gratification. You can continue to add to this account until it reaches your desired level of savings.
Add to Your Retirement Accounts
If you have a hard time reaching the maximum contributions on your retirement accounts each year your income tax refund could be the solution.
Adding a large sum of money to your retirement accounts will help you earn more money and possibly even receive a tax credit for the following year.
If you don’t have a retirement account, now would be the perfect time to start one. There are many online brokerages that let allow you to set up retirement accounts and begin investing.
Pay Off Debt
If you’re in debt it may be a better idea to tackle your debt before you save or invest your money. If you have credit card debt this should probably be the first thing you pay off. Credit card debt usually comes with astronomical interest rates that cost you hundreds or even thousands of dollars.
Figure out which debt has the highest interest rates and start paying it off.
Paying down debt isn’t the most fun thing to do with an income tax refund but it’s one of the smartest.
Tackle a Big Project
Is your furnace starting to tank? Is your kitchen falling apart? Does your car need repairs? If so, use your income tax refund to tackle a big project.
By doing this you can save money in the long run and possibly even earn some sweat equity.
You’ve worked hard all year. If you have an income tax refund coming back, make that money work for you.
Starting an emergency fund, saving for retirement, paying down debt, and tackling big projects are just a few ideas to make your money work for you. Think big and think smart. You’ll be able to get more bang for your buck.