Maximizing Your Inheritance from Uncle Sam — The Smart Way to Use Your Income Tax Refund
The average income tax refund in 2014 was $3,211. Many Americans are no doubt hoping for an even greater refund in 2015. Either way, it’s a handy chunk of change — but where does that money go? Here are some tips for using you income tax refund wisely and getting the biggest bang for your buck.
Pay off debts. Paying a debt with 18 percent interest is equivalent to earning 18 percent on investments. Instead of splurging on a fancy new gadget, use your income tax refund toward credit card debt, car loans or to make an extra mortgage payment.
Pre-pay for your annual vacation. You can find some great deals on airfare, hotel stays, cruise packages and more by booking your vacation well in advance. Using your income tax refund to book your vacation will help you avoid charging it on a credit card.
Replenish your emergency fund. Everyone needs an emergency fund, but it tends to get depleted each year. Ideally, your emergency fund should be about three times your monthly expenses. A great way of using income tax refund smartly is to put it aside for unexpected charges. You’ll thank yourself down the road.
Boost your retirement or college savings. It can be difficult to save for retirement and put aside money for kids’ college funds simultaneously. Your income tax refund can make a significant dent in your long term savings if you invest it wisely in your IRA or college funds — or both.
While receiving your income tax refund can seem like a great call for celebration by splurging, the money will go farther if you invest it in something that will save you more in the long-run. This can effectively maximize the value of your refund for a more successful year and future.
photo credit: kalinovsky/depositphotos.com.com