If you’re one of the millions of people getting a decent tax refund this year, there are several things you can do with your money. It can be fun to go on a shopping spree, dine at a restaurant you normally could not afford, or take a much-needed vacation.
However, you may also want to consider spending your tax refund on something that will benefit your finances, health, or happiness more over the long term. If that’s the case, read on as we go over some of the top tips on what to do with your income tax refund that don’t involve just spending it.
Open Savings Accounts
As someone interested in financial security, you probably already have a savings account where you set aside some money every month. Why not expand on that single account and open multiple savings accounts for each of your unique savings goals? You could divide the money between these accounts and have one for an emergency fund, another for saving up for a big purchase, another for a vacation, and so on.
At TPFCU, you can open several savings accounts that offer competitive interest rates and zero monthly fees. All you need is a $25 minimum opening balance for your first savings account and to qualify for membership based on where you live, worship, or work.
Make Extra Mortgage Payments
Reducing your principal balance on your home loan can result in significant interest savings over the life of the loan. That’s why using your tax refund to pay off a chunk of your principal mortgage loan is a great way to improve your financial standing over the long term.
You can get an amortization schedule from your bank or credit union showing a breakdown of the monthly payments. Use the amortization schedule to determine how many months’ worth of principal payments you can make. Just remember to let your lender know the extra money is to be applied to the principal balance.
Start an IRA
If you do not already have a retirement account, you could use part of your refund to open a Roth IRA. A Roth IRA is a tax-free account that earns interest over time and is set up to ensure you have a steady income once you retire. Should you already have a retirement account, you could simply deposit a portion of the refund check into the account.
Make Home Improvements
If you have several home improvements you have been putting off due to the cost, you could use your tax return refund to tackle some of the items on your list. To help stretch your money further, consider doing some of the improvements yourself, such as painting the walls, installing laminate flooring, and so on.
Not only will these projects make your home an even better and more inviting place to live, but they could also help boost your property value should you one day wish to sell.
Take Career Improvement Courses
If you are stuck in your current position and are being passed over for promotions, you may want to use part of the refund to take some continuing education courses. By working on yourself and your abilities, it is likely the career improvement courses will pay for themselves in the long run. Making this investment in yourself more than worthwhile.
Plus, by spending the money on an educational course, you could qualify for an education credit you can deduct from your next year’s tax return.
Start Your Own Business
Some people use their refunds to start their own part-time business they can grow into a full-time operation. If you’ve been thinking of starting a side hustle or making the jump and turning your part-time business into your full-time occupation, the refund on your income taxes could be just the liquidity you’re looking for to get the process started.
Pay Down Your Debt
Debt can really weigh down your finances the longer you leave it to grow. That’s why using your refund to pay down debt, especially high-interest-rate credit card debt, is a great way to set yourself up for financial success down the road.
Beyond paying off your credit cards, you could also use the refund to make a payment on the principal of your car loan, make extra payments on your student loans, and any other such debts. Reducing your debt will help save you money in the long run because you will pay less interest.
Buy a New Home or New Car
Depending on the size of your tax refund, you may find yourself with more money than you could logically put in an emergency savings account or business checking account. You may also be at a point where you want to build up your assets by making large, valuable purchases that benefit your finances over time. If that’s the case, you could use your refund as the down payment needed to buy a new home or a new car. If you’ve already been saving up your own money to do so, supplementing that with the money from your tax refund could lower your monthly payments and interest even more.
If you’re a TPFCU member, or a Texas resident in search of competitive home loan or car loan rates, check out our product pages to see how our low-interest and flexible terms can help make your dreams of a new car or home a reality.
Donate to Charity
Should you be completely comfortable with your finances as they stand and wish to do something good for others with your tax refund instead of spending it on yourself, you could consider donating all or part of your refund to charity. Do some research to find a cause you’d be happy to support and reach out to the person in charge of donations to find out how the process works.
As a bonus, any charitable donations may also be deductible from your total income the next time you file your tax returns.
Invest in Yourself
Many people choose to use their tax refunds to invest in personal development and well-being. Whether that means buying a gym membership to improve your fitness, signing up for therapy or meditation sessions, or going to seminars by professionals you admire, investing in yourself can be a choice that pays dividends in the long run.
As you can see, there are several smart things you can do with your tax refund. For more ideas, to open a savings account or IRA account, or to apply for a mortgage or car loan, please feel free to stop by your nearest branch of The People’s Federal Credit Union or call us at 806-359-8571 today!
