This tax season, the average federal tax refund is over $1,900. Tax refunds are a happy windfall for many people, and it’s tempting to spend that lump sum of cash on something fun. However, if you can resist the urge to splurge, here are four ways you can invest your refund toward your financial future:
- Reduce your debt. Paying down debt, especially on high-interest credit cards, may save you big on finance charges.
- Build your emergency fund. Experts recommend setting aside three to six months’ worth of expenses in a bank account as a safety net in case of unexpected expenses or loss of income.
- Improve your home. By investing in upgrades or repairs for your home, you can increase its value and enjoy the improvements.
- Save for your goals. Some extra funds could bring you closer to your next vacation, a home purchase or other goals.
Lastly, if you receive a big refund, consider adjusting your withholdings or estimated tax payments. Reducing your withholdings or payments may allow you to receive more in each paycheck rather than waiting for a big refund every year.This material is for informational purposes only and is not intended to provide, and should not be relied on for, tax, accounting or financial planning advice. Consult your own tax, accounting and financial planning advisors for advice for your specific situation.