According to the IRS, the average tax return will be around $2,755, with more than 74% of Americans receiving money back this year. As tempting as it is to blow your refund on a vacation or shopping spree, there are a number of ways to make that refund work for you, saving you a lot of money in the future.
Buy a new appliance
Buying a new appliance can save you in the long run. With newer, more energy-efficient models, your monthly bill amounts will decrease. When you do shop for an appliance there are two things you must consider. First, the purchase price and second the operating cost. The operating costs are the energy costs associated with the lifetime of the appliance. Depending on the type of the appliance you’ll be paying that second cost between 10-20 years. On average refrigerators last 14 years, clothes washers about 11 years, dishwashers about 10 years and room air conditioners last about nine years. When purchasing a new appliance it’s important to look for the ENERGY STAR symbol; these items cost a bit more but you will receive a higher return in monthly savings.
Invest in 401(k)s or IRAs
When investing through IRAs and or 401(k)s, you are able to take advantage of tax savings. As long as your money stays put in these accounts you can avoid annual tax on these accounts. Both Roth IRAs and 401(k)s are considered tax free income. Don’t wait, start saving today!
Start a 529 for future education costs
A 529 College Savings Plan is an account that is used for future education expenses. This type of plan offers a number of tax breaks while also allowing you to save for your child’s college expenses. Currently your contributions are not deductible on your federal tax return, however this particular sum of money grows tax-deferred, and once you are ready to access the money for your beneficiary education, the money comes out federally tax-free. However, you do get immediate state tax breaks with a 529 College Savings Plan.
Make an Extra Payment on your Mortgage
Making an extra payment on your mortgage can save you big in the long run. In fact, making one extra payment can decrease the duration of your mortgage by seven months. Make sure you make a payment on principal rather than interest.
With these simple tips, you can make your tax refund work for you. You’ll never regret saving money.