Productive Ways to Use Your Tax Refund
If you're expecting a tax refund, you may be looking forward to splashing out on luxury items or fancy vacations. While it can be fun to splurge, this isn't necessarily the most practical way to spend your cash. If you want to build a more financially stable future for yourself and your family, consider taking a pragmatic approach. There are many ways you can leverage your refund to support greater wealth. This guide lays out some of the most popular options when it comes to spending your tax refund productively, and includes tips on making the most of each option.
Pay off your debts
If you have debts, one of the best things you can do with your tax refund is pay them down. Allowing debt to build up can be risky, as you'll accrue interest on the unpaid sums. This can result in a snowballing situation, making it increasingly difficult to pay what you owe. If you have multiple debts, take a strategic approach when deciding which one to pay off first. There are various strategies for debt repayment you can consider, such as paying off the debt with the highest interest rate first. Paying down debts also improves your credit, making it easier to achieve other goals, like getting a mortgage to buy a house.
A down payment on a new home
If you're not encumbered by significant debts, you might consider using your tax refund for real estate investments. For example, you might use your tax refund to go towards an investment property, a house you don't live in but rent out for money. When purchasing investment properties, consider key characteristics like location. For instance, a beachfront location is popular among renters. Alternatively, if you're ready for a new home of your own, your tax refund can help fund the down payment. A realtor like Jeff Nitz can help you find a fitting property.
Renovations to boost your home's value
If you're not ready to leave your current home, you might consider using your tax refund to spruce up your current space. Renovations and remodeling can boost your property value. So, if you do decide to sell later, you'll be able to command a higher price. Homelight offers a list of renovations that can increase home value, like adding livable square footage, creating a double-sink bathroom vanity, and installing a walk-in pantry or kitchen island. Boosting curb appeal by improving your landscaping, for example by planting a privacy hedge or flowers, is another great option.
A college fund for your kids
If you have kids, you've undoubtedly already considered how you'll pay for their education. College and university tuition in the United States can run into the six figures for a full degree, so it's good to start planning early. There are many ways you can invest to save for your child's future, such as a Coverdell Education Savings Account, a Roth IRA, a custodial account, mutual funds, and savings bonds. Another option is a 529 plan. The U.S. Securities and Exchange Commission provides more details on this type of plan, which is a tax-advantaged savings plan.
Further education to boost your career
Another great investment when it comes to your tax refund—you! If you're considering a job change or simply want to ramp up your career, furthering your education with an online degree program is a great way to start. For example, you can get your Bachelor of Science in Education and join the nation's teacher workforce, shaping the young minds of tomorrow. There are many other online degree programs too, from criminal justice to MBAs. An online program is ideal, giving you great flexibility to study alongside other work or family obligations. Plus, you'll enjoy competitive tuition rates.
When you get your tax refund, you might be tempted to spend it on something fun. However, the above spending options will reap larger rewards in the long run, setting you up for a more fiscally responsible future.
If you're interested in investing in property or buying a new home with your tax refund, check out this real estate blog for more resources.
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