Saving money is kind of like eating a healthy diet. You know you should do more of it, but it’s hard to resist making spur-of-the-moment choices that make you happier immediately but worse off later. A tax refund marks a great chance to get into a better financial position for the future.
- Create an emergency fund
Many homeowners don’t have enough in savings in case of a sudden financial need. A lack of savings leaves you vulnerable to a job loss, medical emergency or major repair and can force you to carry high credit card balances for an extended period of time. Using your refund to start an emergency fund could leave you breathing easier should one of those events arise.
- Pay off debt
If you are carrying a credit card balance, consider using your tax refund to pay that off. Going this route allows you to save more money every month once those minimum payments vanish from your list of bills.
- Save for retirement
What better way to sock money away for retirement than by using funds that aren’t a part of your paycheck anyway? You’ll probably be grateful that you had the foresight to save for retirement rather than spend it on something you’d have long since forgotten about.
- Seed the college fund
If you have children or grandchildren, you’d be doing them a huge favor by saving your refund in a college fund for their benefit. You would then be able to help them afford a higher education in an era where rising costs leave many saddled with massive debt along with their diploma
- Make home improvements
If you live in an older home, spending some of that refund around the house can lower your energy bills. Replacing old windows can improve the efficiency of your air conditioning and replacing old appliances can help you use less energy too.
- Buy life insurance
Life insurance can be easy to overlook, but for those who are married with families, a term life policy can provide protection for loved ones at a relatively low cost. For the cost of a few hundred dollars, your tax refund can allow your family to maintain its standard of living if the unthinkable happens.