Tax season is just around the corner and if you’re lucky, you will receive a tax refund. Now is the perfect time to plan what you will do with your refund. There are few other times in which you will come across extra money that can be invested in your future.
Pay Off Debt
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Debt can affect many areas of your life. Not only can it make it difficult to get ahead financially but it can prevent you from taking out additional loans such as an auto loan or a house mortgage. When paying off debt, you want to prioritize your high-interest loans first. Making the minimum payment on high-interest loans means you can end up paying thousands of dollars in interest.
After paying off high-interest rates, consider paying down your car loan or student loan debts. The faster you pay off these loans, the more money you can keep in your pocket each month.
Invest in Individual Stocks
Investing in individual stocks is a great way to increase your financial worth. Unfortunately, many people feel that they do not have enough disposable income available in order to justify the risk of investing. By investing your tax return with carefully researched stock trading, you not only have the opportunity to significantly increase your profits but you are not sacrificing your bills if it takes longer than expected to pay out.
Fund a Retirement Account
Retirement may be the last thing on your mind as you cash your tax refund. However, it is important to consider and plan for retirement as early as possible. When you begin funding a retirement account early on, you are likely to earn more for a comfortable retirement. Additionally, if you are far off from retirement, you have the option to invest in riskier of funds that also have the ability for greater returns.
Use It As a Down Payment
There are many advantages to owning your own house. In addition to tax incentives, you are paying toward something that you will own rather than a rental property. One of the biggest deterrents to homeownership is coming up with the down payment. Not only is some type of down payment often required but the more that you put down on the loan, the more affordable that your monthly payments will be. Using your tax refund as a down payment can help you achieve homeownership.
Pad Your Emergency Savings Account
Most Americans understand the importance of having an emergency savings account, but few actually contribute to one. Experts recommend a minimum of between three and nine months of expenses. Putting off the funding of an emergency account is often the first thing to happen when expenses are tight. Anytime that you come across a large amount of money, such as with a tax refund, consider padding your emergency account.
Before you cash this year’s refund check, consider your options. You can use this money to improve your financial situation and set yourself up for a comfortable lifestyle in the future.