Using Your Tax Refund Wisely
Q: We are approaching the time of year where everyone is starting to file taxes and some of the lucky ones will even get some money back. What are some smart ways to use your tax refund?
A: First of all, it’s important to remember that the money received back from taxes is not actually extra income. It’s your own hard-earned cash that was essentially a free loan to the government. That being said, one of the best things you can do with your tax return is invest it into a retirement account.
Q: That’s great advice, what are some other financially smart ways to use your tax refunds?
A: Another great option is to pay down debts, especially if you have high interest rate credit cards. Paying down or paying off your debts is a smart decision because it can free up your cash flow for the remainder of the year; which you can then save into an emergency fund or for something fun like a vacation.
Q: Is it ever a good idea to spend your tax refund?
A: It can be, just make sure that you are spending it in a way that will improve your financial situation long term. For example, making needed repairs or upgrades to your home which can increase the value of your home. That’s a smart way to spend a tax return because you will see a return on investment in the long term.