If you're one of the 80% of taxpayers who will be receiving a tax refund this year, chances are you're debating what to do with the money (you can find out when you should expect to receive your tax refund). Rather than spend the money frivolously, why not use it to boost your bottom line?
Here are some ways to put your tax refund to good use:
1. Pay off high-interest debt
While it's certainly not the most exciting option on this list, if you have credit card debt, paying it down (or off) is one of the best financial moves you can make. Free yourself from the shackles of high interest charges and kick at least a portion of that debt to the curb. It's been said that action breeds confidence and courage—taking this first step towards knocking down your debt will help you move in a positive financial direction.
2. Build your emergency fund
Your car broke down; your child got sick; the neighbor kids busted your window while playing baseball. Accidents happen all of the time so make sure you're prepared for them! You'd be amazed at how free you'll feel once you have the peace of mind of knowing you're ready for the random strikes that life throws your way.
3. Max out your Roth IRA
It too late to make a contribution for 2014, but you can definitely start working on 2015's contribution. Considering the amazing benefits Roth IRAs provide, if you qualify for one you should try your best to max it out every year. However, even small amounts can do wonders over the long-term, so send over whatever you can!
4. Apply your refund to future tax obligations
Are you self-employed? A freelance or contract worker? If you're required to make estimated quarterly tax payments, you can apply your refund directly to those future obligations. Doing so now will help to alleviate tax-related stress in the future. It will also help to free up future income for other financial goals.
5. Make a principal-only mortgage payment
If saving thousands of dollars in interest appeals to you, making additional payments to your mortgage–especially those that are principal-only–is the easiest way to do so other than paying off credit card debt. Check to make sure your mortgage company doesn't charge a pre-payment penalty and send that check/make that online payment today.
6. Invest in your home
Home improvements are a great way to boost your home's value. Plus, if there's a project you've been wanting to complete but haven't had the money to do so, finally crossing it off your to-do list will increase your overall satisfaction. Simple, inexpensive changes such as paint color, faucets, and light fixtures can make a world of difference. Additionally, if you challenge yourself to DIY these upgrades or repairs, you'll expand your skill set while saving money.
7. Invest in yourself
Never underestimate the option to invest in your health, education, or relationships. From enrolling in foreign language courses to getting back into shape or rekindling that romantic spark, with a small investment in yourself, you can literally reap the benefits for years to come.
8. Have (a bit of) fun
While it's ideal to take care of the items above on this list in lieu of having fun, it's not realistic. To avoid burnout or resentment, try allotting a small portion of your tax return to whatever new gadget you've been coveting, a nice meal out, or some other purchase that is for pure enjoyment. Just don't choose something from our list of the Dumbest Ways to Spend Your Tax Refund. You'll definitely not regret giving yourself a bit of a break as long as you're still moving along well with your other financial goals.
What do you plan to do with your tax refund this year?