If you’re one of the 80 percent of American workers expecting a refund from their tax return this year, you’re probably already planning how to spend it. While it’s tempting to treat the money as a windfall and use it for pure fun, you may want to stop and consider your alternatives. Smart spenders take the long view, and they consider their future happiness as well as their present-day gratification. Here are five ways you can get the most benefit out of this year’s tax refund:
Pay Down High-Interest Debt
Today’s debt translates into less freedom in the future. Carrying high-interest loans such as credit card balances becomes expensive over time, and the sooner you pay them off the sooner you’ll have extra funds available for something that’s actually fun. Furthermore, decreasing your debt load pays dividends because it improves your credit score and makes future purchases more affordable.
Bulk up Your Savings Account
Life brings uncertainty, and financial advisors suggest everyone put aside two or three months’ worth of living expenses in a “rainy day” savings account. You’ve undoubtedly heard this advice before, but you may have found it difficult to follow. This year’s tax refund can help make your emergency cushion big enough to keep you afloat in rough waters. Don’t have an emergency fund? Now is the perfect time to create one; consider opening an online savings account. The benefits are highlighted here.
Try out an Interesting Investment
While investments may not pack the thrill of jetting off to a tropical island, they can be a cool way to mix novelty with prudence. Today’s online marketplace has opened the door to all types of new investment opportunities, such as peer-to-peer lending, global microloans, real estate investing and much more. Take some risks with your tax refund, and see what happens; you might just score a big return on your gamble.
Strengthen Your Infrastructure
If you own your own home, you undoubtedly have a list of things to repair, remodel or replace. Spending your tax refund on upgraded kitchen appliances or a new bathroom will provide you with immediate daily gratification, while also increasing the long-term value of your home.
Invest in Future Fun
If you’re determined to spend some of your tax refund on fun and games, consider purchases that will give you the best long-term value. Skiers will appreciate how a hot new set of high-tech skis spells out many seasons of stellar runs, whereas outdoor enthusiasts know a new lightweight tent can last for years and open the door to unexpected adventures.
When you spend your tax refund wisely, you can improve your future financial security while providing yourself with a bit of immediate pleasure.