Getting a tax refund is exciting, and there are so many things you could spend that money on. However, using your refund wisely will feel better in the long run, rather than just using it for instant gratification. Follow these tips on how to make the most of your extra money.
Save for an Emergency
One of the easiest things to do with a tax refund is to put it into your savings account to make sure you have enough to cover unexpected expenses, such as car or home repairs, medical bills, or even temporary unemployment . A good rule of thumb is to have three months’ pay stashed away for emergencies.
to learn more about emergency funds and why you should have one.
Pay Off Debt
In 2015, 80% of Americans were in debt
. For most of us, some amount of debit is not a bad thing (like mortgage and car payments) as long as it’s manageable. However, for others the debt begins to mount and is eventually hard to pay down. Besides making sure you’re not borrowing more than you can afford, and making sure that your interest rate is competitive, keep debt to a minimum by paying off what you can. Apply your tax refund toward higher interest rate debt, such as credit cards, and you’ll be that much closer to living debt free!
Want to pay down debt even faster? Learn about Greater Nevada’s personal loan
Let Your Refund Grow
If you already have enough saved for emergencies, why not put your refund someplace where it can grow even more? One way to invest it is with a Certificate of Deposit or CD
, which typically provides a higher return than a traditional savings account, as long as you keep it invested for a specific amount of time.
Start a Vacation Fund
If you have a good emergency fund, have a manageable amount of debt, and have started investing for your future, then lucky you! Maybe it’s time to treat yourself by using that tax refund to start a vacation fund. Taking time off for rest and relaxation can help reduce stress, improve your productivity and help your physical and mental wellbeing. If you need more convincing, read the 7 Benefits of Taking Vacation Time