Posted: 3 July 2018
Whether you are a small business owner or an average consumer, you have likely experienced receiving an unexpectedly large tax refund at some point in your life.
The big question after getting this tax return check is, “what do I do with this money?”
Now, you may want to just blow it on the hottest product at the time. But before you jump to any rash purchases, consider some of your other options.
Read on to learn five financially sound ways to spend your tax refund.
1. Pay Off Credit Card Debt
Though it may be tempting to go on a huge shopping spree after getting an extra-large tax return, why not use some of that money to get the credit card companies off of your back?
Using your tax return to pay off outstanding credit card debt is a great use of this “extra” money you hadn’t planned on receiving. Depending on the size of the payment and your debt, you may not be able to pay it all off, but every little bit helps.
2. Make An Extra Student Loan Payment
You can, of course, also use your tax return check to pay down debt of other kinds. For example, you could take that refund from the IRS and make an extra student loan payment.
Student loans are often massive and can be quite intimidating when you contemplate how you will pay them off. But this is where learning how to spend money wisely will help you greatly.
Instead of treating this money as completely “extra” and thus blow it on whatever you want most at the time, if you invest that tax refund in your student loans, that burden will start to feel much lighter.
3. Make Some Small Home Improvements
If your debts are all taken care of, maybe use your tax refund to invest in your home. After going through a great tax service like Online Tax Return, consider using your tax return check to make some home improvements.
This money can be used for a number of different projects. Perhaps you need to replace one of the doors in your house, or you want to hire a carpet cleaning service. An unexpectedly large tax refund is a great opportunity to tackle these sorts of improvements.
4. Build Up your Emergency Fund
Of course, you can never go wrong with just saving that money away in an emergency fund. You never know what unexpected expenses might come up this year, so hiding that money somewhere safe for a rainy day is always a good idea.
5. Use Your Tax Refund To Give A Tax-Free Gift
If you are in a great spot financially this year and are looking to give back, consider using your tax return check to give a tax-free gift. You are able to give this gift to whomever you choose, even to a charitable organization if you would like, provided that it is under the IRS limit of $14,000.
More Ways To Spend That Check
We hope that this list has helped you to decide what to do with your tax refund.
If you still have money left over for some shopping, you may be interested in reading about these shopping apps that will save you money!