Do you have a plan on how you will spend your tax refund?
If you don't put a plan in place it will be much easier for you to spend it all quickly on things that don't matter.
A tax refund marks a great chance to set yourself in a better position for the future. If you’re getting a refund from the IRS, here are 5 great ways to make sure your money continues to work for you.
5 Ways To Spend Your Tax Refund
1. Start Your Emergency Fund
An emergency fund is a great way to help you when a large expense hits, health issue, car issue, lost job etc...
Many experts say that your fund should contain about six to eight months’ worth of savings. Storing that much money might take months (or even years).
So use your refund to make a significant deposit to your emergency fund.
2. Pay Off Debt
Paying off your highest interest debt is a very smart thing to do with your tax refund.
Put your refund to work by starting your debt elimination program of choice, high-interest private student loans, car loans, or credit card debt.
3. Invest In A Roth IRA
Using your tax refund to get a head start on Roth IRA contributions
This may result in your three-digit tax refund growing into to a four-digit addition over the course of several years.
4. Add To A College Fund
If you have children or grandchildren, you’d be doing them a huge favor by saving your refund in a college fund for their benefit.
Setting up a 529 plan can help them afford a higher education in an era where rising costs leave many saddled with massive debt along with the diploma.
5. Spend It On Something You Want
Yes, spending a small amount of your refund on something fun, that you want is perfectly fine.
Don’t feel guilty about using the extra cash for a summer vacation or to treat your family to a nice dinner.
Just don’t get carried away, we say usinfg 10 to 20% of your refund on somethign fun is ideal.
Finally - Whether it’s a major windfall or just a drop in the bucket, your refund should feel like “found money”.
If you’re smart, you can put it to work for you and improve your financial situation.
What do you plan to do with your tax refund?