Tax Season is officially over, and after a long yet highly anticipated wait we should all be receiving our refunds. Now comes the time to decide what we’re going to do with our refund. Now I know many of you are thinking about cashing it out, but don’t. Here are a few suggestions on perfect ways to use your tax refund and see some return on what you spend.
Pay Down Debt
Most personal finance professionals will start by telling you the same thing, “pay down your debt” which is a great tip, but using a strategy to pay down your debt will stretch that tax refund further and allow you some peace of mind. For instance start by getting caught up on old bills or even pay off some medical expenses. This will help save money in the long run and eliminate pesky payments down the road.
Another strategy is paying down debt that carries the highest interest rate. Doing so will not only save you a ton on interest, but also reduce the length of time required to pay off your debt. Oh, and don’t forget the “Debt Snowball” plan. You can do this in 4 easy steps:
- Make a commitment to stop adding new debt.
- Write down and record the balance on each card, from smallest to largest, and include the required minimum payment.
- Determine how much you can pay in addition to the minimum payments. Pay that extra amount towards the card with the lowest balance each month until it’s paid off.
- Take the extra amount plus the minimum payment from the card you just paid off and apply it to the next credit card on your list, and so on.
Using strategies such as these can help shrink your debt as well as improve your credit score.
Another effective way to utilize your tax return is by simply saving it. Easier said than done right? Just stashing your money away in a personal savings account is not the only way to save for a rainy day.
Exploring savings options such as retirement accounts, educational savings, investment products, or even government bonds could all be healthy choices for building your assets. (Please be sure to check with your financial/tax advisor.) The best way to find out is by doing some research or by talking with a financial advisor on which options may be best for you.
Invest in Yourself
Lastly and personally my favorite use of a tax return is investing in yourself. What do I mean by this? Well I don’t mean go out and blow it all on a new wardrobe if that’s what you’re thinking. We’re talking personal development.
For example, if you are a student put the money towards your tuition. Take the time to learn a new skill or pay for a certification course that may help you find a better job. You can even use those funds to make some improvements on your home which could boost its resale value.
However you decide to use your tax return just remember it only comes around once a year. Why not take the opportunity to be productive with it? Vacations, clothes, entertainment, it’s just stuff and “stuff” doesn’t last for very long. But your personal development, a debt free credit report, and the security of savings will benefit you throughout life. I wish you all good luck and happy refund season!
Posted by: Justus James-Gullette
About the author: Justus is a Member Advocate 1 at the Unitus Plaza branch where he assists members on a daily basis with account transactions. He is also close to completing a digital marketing internship within Unitus’ marketing department. While originally from Seattle, WA Justus spent a lot of his childhood in Philadelphia, PA. Justus graduated with a double major in Marketing and Advertising from Portland State University. While he loves sports and music, his real passion and desire for the future is to travel abroad.