It’s that time of year again: tax season. After the time-consuming tax filing process, you anxiously wait for your tax return.
Although you may be inclined to go out and spend the money on a weekend vacation or an item you’ve been dying to purchase, take a second to consider some of these options for spending your return.
Pay down debt
A tax return is one of the largest lump sums of money you may receive all year. Use it wisely and dedicate a portion (or all of it) to paying down debt. If you have credit card debt, make a lump sum payment towards the bill.
If credit card debt isn’t your problem, consider making an extra (13th) payment on your mortgage to lessen the amount you have left.
If you are burdened with student loan debt or a personal loan, here’s the perfect time to make a lump sum payment to cut down interest—and the time you will be paying back the loan.
Start or build up an emergency fund
If recent events have taught us anything, it’s that it is imperative to have an emergency fund for your household.
Whether you keep this fund in a savings account or under your mattress, you should try to build an emergency fund with at least six to nine months of living expenses. This money can assist if there is a natural disaster, if you have unexpected damage to your home or car, or if you lose your job.
Consider your emergency fund a safe haven in times of need and do not touch it unless there is an actual emergency.
Start or build up a retirement fund
People are working longer than ever to make up for the fact that living expenses are going up and they didn’t save enough to retire.
Prevent that from happening to you by opening your own retirement account or adding a lump sum of money (on top of your regular contributions) from your tax refund.
Depositing as much money as possible will help to ensure that you will have a more comfortable retirement when the time comes to throw in the towel.
Although these options may be less gratifying than buying a big screen TV or taking a vacation, they will be more rewarding in the long run.