Expecting a tax refund this year? If so, you could already be considering how you're going to put that money to use — you may even want to spend it as soon as you get it. But if you hold on to that refund and think about it in terms of how you may save or invest it, it has potential to help you a lot with longer-term needs. Read on to find out some smart ways to invest your tax refund.
- Pay down debt. Can you imagine what it would feel like to rid yourself of debts, especially high-rate ones? Even paying off a relatively low amount gives you more flexibility with your finances. Credit card balances and auto or student loans are good places to start. List debts by interest rate and amount owed so you know which is realistic to tackle first.
- Build up an emergency fund. According to a survey conducted by Bankrate, almost three of every ten Americans don't have emergency savings to fall back on. Experts recommend saving up to six months of expenses so that you can cover emergency or surprise costs that life throws at you. Your emergency fund should be easy to access.
- Prepare for a large expense. This could mean putting away some of that refund for anything from a travel fund or big vacation to home renovations to a new car.
- Save for the future. Retirement may be a long way off, but the earlier you start saving for it, the more you could make. If your employer matches any part of your contributions, that's free money you could take advantage of. If work doesn't offer a retirement plan, think about opening up an IRA (Roth or regular) on your own.
Think of your tax refund as a way to accomplish financial goals. It may not sound exciting, but your future self will be very happy when there are funds for what you need.
To learn more, go to:
— How to invest your tax refund
— How to Invest Your Tax Refund So It Feels Like Splurging
— Save or invest your tax refund
— What to do with your tax refund: Save money, pay debt or get a prepaid debit card