10 Smart Ways to Spend Your Tax Refund

The average American gets an average tax refund of $3000 annually. The temptation, normally, is to go on a “me time” spending spree. Spend a little on shoes, a little on snacks, a little on shopping, maybe a stroll to the beach and every other thing. “What would be more satisfying than spending money that is not directly from your paycheck? “What if you are told that there are better, smarter ways to invest or spend your tax refund?Why spend on the “now” and regret later, when you can solve problems, invest in the future and enjoy later? You would be surprised how much $3000 can do for you if you appropriate it well. Here are a few insights you will appreciate.

#1. Debt Free

According to cbnc.com, the average American has a debt of $9,593 between the ages 18 and 23, $78,396 between 24 and 39, $135,841 between 40 and 55 the list goes on. Just in case you are wondering where would be the best place to do a little wise spending, why not invest in freedom? You can start by paying off your credit card debt which accrues quickly. You may prefer to begin your journey to a debt free life by paying off your student loans or car loans.

#2. Go for Upgrades

If you like shopping, shop for something that will improve your overall financial picture. Upgrade home appliances. Upgrade your home HVAC system to a more energy efficient system, which will save on your overall home heating or cooling bill. Upgrade windows, paint or other home improvements that will increase the value of your home.

#3. Grow Your Money

Think about investing that financial windfall. Invest in stocks. Do some research and invest in an institute or institutes that you believe have the potential for growth. You may prefer to get a financial professional to help you build a suitable, maybe, comfortable portfolio or use Mint’s investment tracker. What about a 529 plan? This is a tax benefit investment account that can be used to pay for qualified educational expenses for the appointed beneficiary.

#4. Build an Emergency Account

It is a good practice to have an account where you can stash in a chunk of cash for the unexpected. Take a part or all of your tax refund and deposit them into an account you opened for this reason specifically. Whatever enters there should not be used unless it’s an emergency, like an unexpected illness, car issues that can’t be solved with the cash at hand, major appliance failure or at worst, a job loss.

#5. Invest in Yourself

Think about investing in yourself. This is because your worth is tied to what you know and the skills you have. Take classes online that could improve your value at work or to seek out a new career path. There are classes for graphics designing, data analysis, web design etc.

#6. Retirement Planning

Plan for retirement earlier than later. There’s a lot to save up for; health care, vacations, daily essentials etc. Thus, it is necessary to start off early. Use your tax refund to plan for retirement. You can purchase a Roth or Traditional Individual Retirement Account. Your tax refund makes a good start, you know? If you already have one, then you can use all or a part of your tax refund and compliment it. It can be a huge boost to your plans.

#7. Reach for the Stars

Start that business you always wanted to. For a start, you wouldn’t want to have to quit your job for that. If there’s a business you always wanted to venture into, a line of career you have nurtured a desire for or a skill, talent or even a hobby you would want to explore, your tax refund will help give you a head start in your pursuit. It can serve as a start-up capital, help you buy some inventory, start up an online store, or even build a website.

#8. Buy Life Insurance

This is mostly overlooked by younger generations as unnecessary. However, in the even of an unexpected tragedy, this investment could be a gift to your family.

#9. Educational Savings

You can use your tax refund to build up a future for your kids. One of the ways you can achieve this is by setting up a 529 plan, this way they won’t end up with gigantic debts by the time they are done with school.

#10. Home

Use the refund to make an extra home loan payment. Those extra payments reduce the overall interest payments over time.

This is especially useful if you are already saving up for your dream house.