5 Things to Think About Doing with Your Tax Refund

An impressive number of tax filers end up with some kind of IRS refund every year. This year’s refund may not be as substantial as in the previous years seeing as how the new withholding tables were introduced last year which allowed workers to pay less in taxes than usual.

Even so, there is a chance that many filers will see some money back this tax season from the IRS. Here are some ways you can put that money to use.

Emergency fund– it was found out by the Federal Reserve Board that 40% of Americans do not have immediate cash that could help them sort out a $400 emergency. Your tax refund should stay in the bank if your savings don’t exist. Always have an aim of having at the very least three months of essential living costs in savings no matter your earnings or how your expenses look like.

This action helps to avoid debt in the event of unemployment or unexpected bills. Your tax refund could help you connect the gap between the money you need and the money you have. That is if you totally lack in savings.

Pay down costly debts on the credit card- whatever the reason is that is having you carrying debt on your credit card; you will end up racking up more interest the longer you hang on to that balance. Your tax refund can help you improve your credit score and save you money by helping to reduce or eliminate that balance. Not only does paying off your debt preserve your score and as well avoid costly interests, but it can also make borrowing more affordable so that you can borrow money for important things like buying a house.

Boost your nest egg– if you are one of the 42% of Americans who have no money set aside for retirement, 401(k) or IRA will be the best place for your tax refund. If you are saving in an IRA, you can pad your long-term savings that way and transfer those funds directly. You can as well sign up to have your payroll department withhold your refund amount from your paychecks and to make up the difference pay your refund to yourself. This is if you have access to a 401(k) through work.

Reduce your student loans – your tax refund might help you eliminate a good portion of the load of student debt your carrying which shortens the life span of your loan and saves you money on interest. Since private loans are not as regulated as federal loans, you are probably paying a significant amount of interest on your debt. That’s a good enough reason to get rid of that loan as soon as possible.

Invest in your career– this might mean covering the cost of a conference or seminar for networking or paying for courses to sharpen your skills. On a long-term basis going back to school may most likely give a positive kick to your earnings. A tax refund is anything but free money, remember that when it seems like a windfall. Think of the money as what you need to build a more solid financial ground for yourself.