Each year, as we do our duty with the Internal Revenue Service, there’s always a hope that we’ll score a significant refund from our income taxes.
That extra money is always a great gift, but what if you could turn those extra dollars into some long-term savings or credit-building strategies? Here are 5 ways to put your tax refund to use while being wise with your credit.
Give Your Credit Cards a Break
Are you the recipient of an unexpectedly large check from Uncle Sam? Consider using that bonus to attack the balances on your credit cards, rather than racking up more debt. A one-time payment can help significantly reduce both the interest you’ll owe in the long run, as well as cutting down your credit utilization ratio – and that’s a positive factor for your credit report, and your ability to get more credit at a better rate in the future.
Upgrade Your Home
A surprise return from the IRS can also go much further if you use the funds to make some much-needed repairs or upgrades to your home. With housing prices skyrocketing in many regions of the country, even a small investment in your home can mean a positive boost in equity or resale value, so consider that kitchen upgrade or the long-awaited fence or roof repair project you’ve been procrastinating.
One of the best investments you can make is in your own professional future, so maybe it’s time to consider spending a bit on an educational upgrade. Your ability to land a higher-paying job can certainly be boosted with some college courses. An associate’s degree, a specialty certificate, or even a master’s degree in your field, may make you a more attractive candidate or help prompt the boss to consider a promotion to a better position.
Create a Rainy Day Fund
Though the economy has certainly improved, we’re all aware of the uncertainties that life sometimes throws at us. Unexpected layoffs, sudden medical costs, car accidents, or unplanned travel expenses are all examples. Rather than resorting to credit cards to cover your emergency needs, why not invest that money into a savings account and hold onto it until you really need it?
Think About Your Retirement Plans
In an era of never-ending political drama, the one issue you never hear discussed is America’s retirement crisis. Too many working Americans have entirely neglected to begin building any retirement savings.
Consider using your tax refund as a contribution to an IRA, or use it to put some extra value into your 401(k) savings plan at work. The more you pre-load your retirement savings accounts, the better off you’ll be when you reach retirement age.
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