Nobody looks forward to tax season. For most people, it can be one of the most stressful times of the year. However, every cloud has a silver lining, and the silver lining of tax season is a tax refund.
Many taxpayers receive this refund if they end up paying more taxes than they owe during the year. Depending on how much you are overcharged for taxes, this refund can result in a large cash windfall. As with all money, it is important to be finically responsible with your tax refund. Fortunately, there are plenty of different options for investing your tax refund wisely.
Build an emergency fund
Life is many things, and chief among them is being unpredictable. You never know what life is going to throw your way. As such, it is important to be prepared at all times. One of the best ways to be prepared is by building up an emergency fund.
An emergency fund is composed of money that is only to be used in case of an emergency. Unfortunately, according to Forbes, 49 percent of employees lack a stable source of money set aside specifically for emergencies. With a sizeable fund at your disposal, you will be prepared for whatever life has in store.
Start saving for retirement
Nobody wants to work forever. That is why it is critical to invest your money in a retirement plan while you are still working. This will help you stay financially secure long after you leave the active workforce. You can even set up an account for retirement that is separate from your 401k at work. While that large amount of money from your tax refund may seem tempting now, setting it aside for the future will make it that much more valuable when you eventually retire.
Invest in your home
Your current house may not be the one that you live in for the rest of your life. If the time comes to move out, then you will want to sell your old home in order to afford your new one. To get the most money out of your current home, you need to invest money into it. This can be done through home repairs or additions. By sprucing up your current home, you will see a far greater return on investment if you decide to sell it.
Pay off existing debt
Perhaps the most important thing that you can do with a sudden increase in expenses is to pay off existing debt. If you have a lot of debt hanging over your head, then you want to get rid of it as soon as possible.
This debt can originate from several different sources, such as standing bills or open credit card accounts. By paying off your excess debt, you’ll not only decrease the amount of money that you owe, but you’ll also improve your credit score and history.
While it may be tempting to use that tax refund for an impromptu purchase, you will find yourself in a more financially secure situation if you invest it instead. Just remember: do your best to plan for the future this tax season.
This article is presented by Olathe Ford Lincoln in Olathe, Kansas.