Tax filing season can be a stressful time, with mountains of paperwork to sort through, piles of receipts to add up and the ever present fear of the IRS to top it all off. Just making it to April 15 and getting your taxes done is a major accomplishment, and now it is time to celebrate. Now that the numbers have been added up and the figures have been double checked, you find yourself on the receiving end of a big fat tax refund. And now that the check is literally in the mail, or the direct deposit in the bank account, it is time to spend that money, but not all spending plans are created equal. If you want your tax refund to do more than give you a temporary treat, here are nine ways to turn it into extra cash.
1. Replenish your emergency fund
If your emergency fund has taken a hit, the upcoming tax refund season is the perfect chance to replenish it. Having emergency savings can save you cash in many ways, including providing a better alternative to costly credit card debt.
2. Pay down debt
Speaking of debt, if you have any paying it is off is the single best thing you can do with your tax refund. Using your government tax refund to pay off high interest debt like credit cards will put you in a much better financial situation and give you a platform from which to start building wealth.
3. Beef up your retirement savings
Using your tax refund to start a retirement plan or add to your investments can save you money on taxes, but it can also make you money through the growth of your investments and the payment of future dividends. Saving for the future is always a smart thing to do, especially when you use your tax refund for this purpose.
4. Invest in an industry certification
Whether you work in information technology, health care or some other field, earning an industry certification could boost your earnings and put you in line for the next promotion.
5. Improve your home
The home you live in is more than a house – it is an investment in your future and the foundation for your wealth building strategy. Using your tax refund to make home improvements can save, and make, you money by lowering your utility costs and boosting the value of the property.
6. Take a financial literacy class
The more you know about how money works the better you will be able to manage it. A financial literacy class is always a sound investment, especially when Uncle Sam is picking up the tab.
7. Enjoy healthy tax savings with a health savings account
A health savings account provides triple tax benefits with an up-front deduction, tax-free growth and tax-free spending on eligible health care expenses, making this one of the best uses for your annual refund.
8. Increase your insurance deductible
Now that you have some extra cash, you also have a chance to reduce the premiums on your automobile and homeowners insurance. This money saving strategy is a great use for your tax refund, so call your agent today.
9. Open a 529 college savings plan
If you have kids, a 529 college savings plan could save you a ton of money in the long run, and using your tax refund to start one would be a very good investment indeed. The cost of college is not expected to go down, and every dollar you invest now could pay big dividends later.
Dealing with the IRS is not a fun thing to do, but there is a silver lining for those tax filing headaches. If your calculations reveal that a refund is on the way, the 9 strategies listed above can help the money stretch much farther, so you can improve your financial situation by the name the next filing season rolls around.