By financen | May 1, 2019 - 5:17 pm - Posted in Tax
Tax Refund

April 15th is now behind us! Your taxes are complete, and you can finally relax. You can sit back and decide what you want to do with that tax refund! In 2019 the average tax return was $1,947. Will you spend it all on a vacation, put it into your savings account, or invest it? Let’s discuss some of the best uses for the money you receive from your tax refund.

The first great use of your tax return would be to pay off high interest debt that you may have. This could include student loans, credit card debt, or other personal loans. According to simple dollar, if you have a $3,050 credit card balance at 18% APR and you have the opportunity to pay it off in one fell swoop. If you used your tax refund to repay this debt, you would save yourself almost four years of monthly minimum payments, and a whopping $1,210 in interest payments alone. The savings can be huge when you knock out some of your high interest debt, so that is why many people will choose this option with their tax return!

Another fantastic use of your tax return is to create an emergency fund. Having a rainy day fund is essential for when life hits you with the unexpected. It is a very good idea to  set aside some money in case of a health incident, car problems, or loss of job. It is recommended that you have at least three months worth of income in your emergency fund. Using your tax refund is a perfect way to get this fund started. There are also banks that offer round up savings, and allow you to easily contribute to your existing fund.

Lastly, and probably everyone’s favorite, is to treat yourself! You have worked hard all year, and you deserve a pat on the back. That could be in the form of a new TV, a fancy night out, or a nice vacation. If you have already set aside a sufficient emergency fund, and do not have any existing debt, then you can certainly spend some money on fun! Even if you plan to spend your tax return on yourself, it is wise to do it in moderation. Perhaps you could allocate 75 percent of your tax return towards a vacation, and then invest the other 25 percent into your retirement fund. Moderation is key!

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This entry was posted on Wednesday, May 1st, 2019 at 5:17 pm and is filed under Tax. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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