If you have a tax refund coming your way, consider using it to bolster your personal balance sheet. We’ve list out 3 smart uses for your tax refund.
Get Rid of Your High-Interest Debt
Using your refund to pay off a balance with an 16% interest rate is like earning 16% on your investments -- an incredibly valuable use of the money. And if you pay off your balances, you can afford to close some cards that are now charging high fees. We listed this first for a reason. Simply put, it doesn't make sense to put more money in your savings or even to invest when you're paying someone else 16% interest or more for the privilege of owing them money.
Replenish Your Emergency Fund
Many people have raided their emergency fund over the past several years and have had little extra money to restore it. You could use your refund to start rebuilding that fund, which can help you avoid landing in credit-card debt if you have an emergency. Keep the money easily accessible in a money-market account or savings account that earns interest.
Boost Your Retirement Savings
If the first two items on this list are taken care of, that is, you don't have a significant amount of credit card debt and you have enough cash in the bank to cover an unexpected expense, the best use of your tax refund may be to invest. Retirement saving is hands-down the best tax break of all, and for good reason. Not only can you get tax savings, but you'll be setting yourself up for financial comfort later!
Whether it’s a major windfall or just a drop in the bucket, your refund should feel like “found money” – and if you’re smart, you can put it to work for you and improve your financial situation. You can even treat yourself – just don’t blow it at on a huge, unnecessary splurge.
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