Now that you’ve (hopefully) filed your tax return, it’s time to think about what you will do with your tax refund. As you consider your options, it’s a good idea to be aware of the way your money can work for you. Before you spend your tax refund, make a plan for your money. Here are 5 ideas:
1. Invest in Debt Freedom
If you have high interest debt, like credit card debt, you can gain by investing in your debt freedom. You aren’t likely to get a 15.99% return on any of your other investments, so paying down your high interest debt is a good way to get ahead with your finances. Pay off the card with the highest interest rate first, and you will be surprised at how much more progress you can make.
2. Invest in Your Future
Do you have room to make an additional retirement account contribution? If so, consider investing in your future. If you aren’t maxing out your retirement account, you should give it a boost. Over time, compound interest allows your money to make money. The longer it sits, the more it makes. Give your retirement fund a bit of a boost with your tax refund, and you’ll be happier 20 or 30 years down the road.
3. Invest in Your Children
Another way you can use your tax refund is to help your children get a good start in life. You can contribute to a 529 plan for your child, or open some other custodial account for him or her. If you are already contributing to such an account, use your tax refund to make an extra contribution and provide a little bit of a boost. While you don’t want to put your own retirement at risk for your child’s college, you can reduce the need for student debt if you use your tax refund to help.
4. Invest in Your Business
Have you wanted to start a side hustle for a while? Do you already have a business that you would like to see grow? Put your tax refund into your business to watch it improve. Your tax refund money could help you buy needed equipment, upgrade some of your systems, or be the seed money that provides you with the inventory you need to get started. Figure out what your business needs, and then use your tax refund to help supply it.
5. Invest in Your Family Relationships
Finally, don’t underestimate the power of family relationships. Use your tax refund to create good memories by going on a vacation. Even a weekend getaway can bring your family closer. Perhaps you haven’t had time to spend with your life partner recently. Your tax refund could be just what you need to reconnect on a short trip.
You don’t have to spend your tax refund all in one place, either. Figure out which priorities you have, and then use your tax refund to invest in a better life and financial future.