The average American receives a tax return of around $3,000. There’s a lot you can do with that extra cash, but some uses are wiser than others. It is best to make sure all other financial obligations have been tended to before you start planning your tax return-funded vacation or shopping spree.
Listed below are the six best ways to use your tax return :
1. Pay off credit card debt
This is the number one thing you should take care of before using your tax return for anything else. Pay off your credit card debt and stop wasting money every month on card payments and interest. Free yourself completely from credit cards by locking them away and telling yourself you will only use them for emergencies and traveling.
2. Pay off a car or school loan
Is there only a couple thousand dollars left on your car or school loan? If so, pay it off! However, it is more important to pay off credit card debt before paying off major loans. You’ll also want to make sure you don’t have a car loan that penalizes you for paying off the loan early.
3. Use it for necessary home improvements
Your home will probably be the biggest investment you ever make in your life, so it’s important to keep it up. If you are in need of new shingles or new carpet, use your tax return to make these necessary improvements.
4. Put it in a savings account for car, home and health insurance payments
Take away the worries of setting aside money every month to pay for car, home and health insurance by putting your tax return in a savings account and using it to pay for all of these expenses. And because some companies charge a little extra for payments made on a monthly basis, you could save even more by using your tax return to pay six months or more of your insurance payments at once.
5. Save it for the holidays
If you like to get jolly during the holiday season, consider using your tax return to fund it all. A great idea is to the money away in a high yield savings account that has no minimum daily balance or monthly fee; that way you will earn a little interest on it before the end of the year.
6. Put it in a college fund for your kids
If you have taken care of all other immediate debts and necessary expenses and don’t know how else to use your return; put it away for your children’s educational future. This is one of the easiest ways to save for college.
And, hey, if you have no debt to take care of, then by all means, have fun with your tax return!