Are you expecting a tax refund this year? If so, you’re in the majority. Over 80% of Americans get money back at the end of the tax year. The average refund this year is close to $2,600.**
Pay down debt, especially high-interest loans and lines of credit. Paying off your credit card before making other investment decisions makes good sense since average annual interest rates for credit cards and personal loans are about 15%. If you don’t want to put it all toward paying off your debt, consider earmarking 20% of your refund toward paying down any high-interest debt you may be carrying.
Start saving and open an emergency account. Most Americans don’t have money set aside for financial emergencies and unexpected expenses. Setting aside part of your tax refund is a great way to start an emergency account. After you open the account, you can set up automatic transfers to take money out of your checking each month to help it grow. Even if you can only afford to save as little as $10 each month, your account will grow over time. Experts recommend that it should eventually total between three to six months’ worth of essential living expenses.
Invest your money. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 in the stock market, over 30 years, assuming a 12% return, you’d have $53,924^. Of course, we always recommend you do your research first before making any investment decisions and talk to licensed investment professionals.
Invest in yourself. Investing in your emotional, physical, intellectual, and career growth is a smart use of money. Advance your career and increase your earning power by using your refund to pay for a work-related conference, additional training in your field or for learning an entirely new skill. Money invested in yourself is never wasted.
Reward yourself. If you’re in the financial position to truly afford it, do something you’ve been dreaming of. Money is to be enjoyed, as well as earned, saved, and invested. Go ahead. Book that vacation, buy that gadget, or treat yourself to a night out!
Donate to charity. Giving back to the community is a wonderful way to support a cause you’re passionate about. For many people living paycheck-to-paycheck, this can understandably take a backseat on their list of priorities. Your tax refund might put you in a position to afford this opportunity.
*This publication is only intended as general informational purposes. We recommend that you consult a tax professional for the most accurate data and/or personal advice. **The average refund for 2018 tax returns is $2,640 according to Yahoo Finance. ^Before investing your money in the stock market, we recommend that you consult a financial advisor for the most up-to-date and personalized advice on investing options.