We’re nearing the end of tax season. You should have filed your tax return, or will be doing so very soon, and know whether you owe more money or if you’re getting a refund. For those of you lucky enough to be getting a refund, good for you! Here are the best things to do with your tax refund.
Pay Down Debt
The first thing you should do with any unexpected money you receive is pay down debt. As you are all aware, the longer it takes you to pay off your debt, the more money you will continue to owe. The lower your debt is, the less you pay in interest. Therefore, the best thing you can do with your tax refund is put it all towards debt. If you have various types of debt, I would suggest putting the money toward the debt with the highest interest rate.
Save It
If you don’t have debt, a good use of your tax refund could be just to save it. There are several options for saving, but one of my favorites is to utilize online savings accounts. Online savings accounts are generally high yield savings accounts. These accounts offer higher interest than traditional savings accounts and almost always offer a higher return on your money than a checking account. Check out my post on the 6 Best Online Savings Accounts of 2019.
Put it Towards Retirement
Sometimes it’s hard to see the benefit of putting money towards retirement, especially when you’re younger and retirement seems forever away. However, the earlier you put money away towards retirement, the more money you will have when you retire, thanks to compounding interest/earnings. Put your tax refund into an IRA and your future self will be very happy you did.
Invest It
The stock market can be volatile and many people fear that by investing in stocks, they can potentially lose all of their money. While a stock market crash IS a possibility, it is rare and sometimes the risk is worth the reward. If you are risk-averse, there are safer stocks out there which you may be more comfortable with. The key to investing in the stock market is doing your research. If you are hesitant to put your entire tax refund into the stock market, opt to invest just a portion of it and see what kind of returns you get. If you see that they’re better than a high yield savings account, you may feel inclined to invest even more.
