While spending all of your refund on a shopping spree might be tempting, spending it on something frivolous doesn’t come with any long-term benefits. Here are some alternative ideas that promise more advantages.
1. Make a Long-Awaited Repair
Have you been ignoring your check engine light? Or maybe it’s the small water stain that appeared on your ceiling a few weeks ago.
While these might alarm some people, you know where you stand. When these minor issues don’t worsen over time, you promise to deal with them when you have the money. Depending on the problem, this could be the best way to handle costly repairs.
If things worsen, there’s always another way. For example, you could take out a loan online if your car stops working or the stain starts to grow. Online loans are a backup if you’re in need of money now to cover urgent, unavoidable repairs. Until then, the wait-and-see method can help you save money.
Now that you have a refund coming your way, you might have the means to afford an auto repair or roof patch. If you’ve postponed something similar, your refund could help you afford an unexpected expense.
2. Make an Emergency Fund
Taking on an urgent auto or household repair right away without borrowing a loan online is possible; you just need an emergency fund.
An emergency fund is a special savings account that sets aside cash for unexpected expenses. You can dip into this fund any time a purchase, bill, or repair exceeds the cash you have on hand in any given month.
Typically, you build an emergency fund over time with several small, consistent contributions. However, a refund can give this account a tremendous boost.
3. Pay Off Debt
Using your tax refund to pay off outstanding online loans, lines of credit, or credit cards is a great idea. Depending on the account, this idea might save how much interest you accrue over time.
Regardless of your debt, paying it off early will free up your budget. You can use the money that usually goes towards its payments on other things — whether it’s savings, household repairs, or a fun splurge.
4. Invest in Yourself
If money has been tight recently, it might be time to start thinking about getting a better paying job. That’s no easy feat if your position doesn’t offer a lot of upward mobility, and your boss is unwilling to give you a substantial raise.
You can use your refund to invest in yourself and enroll in a class to upgrade your skills. MOOC—or Massive Open Online Courses—make it easy and affordable to learn these skills on your own time. Best of all, you can add these new achievements to your résumé to unlock better pay.
5. Invest in Your Retirement
The earlier you start preparing for your retirement, the more time you give these special savings to grow. By investing your tax refund in a registered retirement account, you’ll also take advantage of compound earnings.
Retirement funds accrue interest that can compound once you reinvest these earnings. The earlier you start, the more interest you accrue and compound.
If you receive a tax refund now or in another year, consider one of these five ways to spend it!