Do you have a tax refund check coming your way? With the average tax refund being around $3,000, it may be tempting to blow that money on something fun.
But instead, why not consider using your tax refund to better your finances?
Here are 10 smart things you can do with your tax refund.
1) Start an Emergency Fund
If you do not already have an emergency fund, now is the ideal time to start. An emergency fund is money set aside for any unexpected or urgent expense that you don’t typically budget for. It may be a medical bill, car repair expense, or some other emergency.
An emergency fund can save you from financial disaster. While it is commonly advised to have 6-8 months of living expenses in your emergency fund, even a thousand dollars will be able to protect your finances in the event of an emergency.
2) Pay Off Debt
While it may not be the most glamorous use of your tax refund, using your refund to pay off debt puts that money to great use.
Paying off extra debt now saves you money that you would have spent on interest, so it’s a wise use of your tax refund.
3) Make Home Improvements
Some improvements can improve the efficiency of your home, allowing you to save money in the future. For instance, by replacing old windows, you can create a more efficient home and save money on your energy bill for years to come.
Put that tax refund to good use by tackling your home improvement projects, whether you need to replace old appliances or take on the remodeling project you’ve been wanting to finish. Many of these home improvements can improve the value of your home, making it a smart use of your tax refund.
4) Save for a Down-Payment
Looking to purchase your first home? Bolster your savings by setting your tax refund aside.
Purchasing a home isn’t cheap, but real estate can give you a profitable rate of return. By throwing any extra money you come across into a savings account, you’ll be able to purchase your dream home faster.
5) Purchase Life Insurance
If you’re a younger worker, life insurance might be the furthest thing from your mind. But life insurance is a smart investment for everyone, particularly if you have a spouse and/or children.
You can purchase a term life policy for a relatively low cost. What better way to use your tax refund than to protect your family in the event that something happens to you?
6) Invest…in Yourself
Is there a class or seminar you have been dying to take?
Furthering your skill set can certainly be worth it, but it doesn’t always come cheap. Using part of your tax refund to invest in yourself is always a smart move. Just be certain to consider how much long-term value you will gain from it.
7) Start a Side Hustle or Business
Side hustles don’t typically cost too much to start, depending on what you plan to do. But if you have been wanting to start a side hustle, having a little extra cash on hand may be the perfect incentive you need.
You can use the money from your tax refund to start a website, invest in some basic marketing tools, and purchase whatever else you need for your business.
Could your retirement account, college savings account, or mutual funds use a little boost? That’s a bit of a trick question, because the answer should be yes!
Increasing your investments is always a good idea. With the power of compound interest, every dollar you invest has the potential to become much more. Make a decision your future self will thank you for and put money into your investment accounts today.
9) Save for Christmas Gifts
What if you didn’t have to worry about saving for Christmas gifts this year? How much stress would that eliminate during the holidays?
Set your refund aside and use it for holiday gifts and travel instead. Now that you have money saved up, you can even go ahead and purchase Christmas gifts now to really make your holiday season a breeze.
10) Have a Little Fun
Of course, there is an endless list of smart ways you can use your tax refund. While blowing it all on frivolous things not be the best idea, you can set a small portion of your tax refund aside to have a little fun.
Finances are all about balance, and while you should always be looking to make wise money moves, it’s okay to treat yourself every once in awhile.
Are you anticipating a tax refund this year? What do you plan to do with your tax refund this year? What smart purchases have you made in the past?