Last year, the average federal tax refund was over $2,500. 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 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.
Not expecting much of a refund this season? That may be a good thing if it means you didn’t overpay the IRS. If you do receive a big refund, consider adjusting your withholdings or estimated tax payments to see if you can receive more in each paycheck rather than waiting for a big refund at tax season.
Draper and Kramer Mortgage Corp. does not provide financial planning, tax or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide and should not be relied on for such advice. Do not act or refrain from acting on the basis of this material without first consulting a qualified professional for advice.