Your tax refund is finally here! No matter how big or small it is, it can be an opportunity to get ahead on your financial goals when used the right way. Before you blow it on a shopping spree or a big vacation, keep these tips in mind on how to make the most of your tax refund! Following these tips could just be the key to moving you in the right direction to purchase your first home!
Pay down High-Interest Debt
Paying down your high-interest debt can take time, but it’s a smart financial move to make. Using your refund, or at least part of it, could help substantially when it comes to bringing down your debt. Paying off debt with your tax refund can help you take a sizable bite out of what you owe. The quicker you can manage your debt, the easier it will be to tackle your other financial goals.
Take this opportunity to pay down debt while building your credit score at the same time- which will certainly help in the home-buying process!
Add to Your Emergency Savings Fund
It is essential to have an emergency fund that gives you a financial cushion should life take an unexpected turn that requires instant access to larger sums of money. Saving at least a portion of your refund will only benefit you and prevent you from making unnecessary purchases. If you don't have an emergency fund at all, or an account set up to hold those funds, your tax refund gives you the chance to start one. If you already have an emergency fund, then it doesn’t hurt to continue to add to it. Ideally you will want to keep 3-6 months worth of income in this account.
Make Home Improvements
Purchasing a new appliance or starting a renovation project not only makes your home more pleasing to live in for you, it is an investment that will increase your home’s value for when you want to sell it! Putting tax money towards projects that will give back in value is a great way to make your money work for you!
Add to College Fund
Another option that can make a significant impact is putting some or all of your refund into a college savings account. With an average refund exceeding $3,000 it may be tempting to spend, but putting it to work in a savings account can re-pay you in the long run!
Simply Save It
Are you hoping to buy a house relatively soon? Have you planned for a holiday? Do you want to try a new skill? Or start a business? Just by simply saving your tax refund can help make faster progress toward realizing your goals and investing in your happiness.