Get excited (as much as possible), tax season is here! And that means tax refunds for some of us. It’s tempting to spend this check on new shoes or a flat screen TV, but the benefits may be short-lived as shoes go out of style and electronics become obsolete. Some more strategic alternatives:
Pay off your credit cards: Credit cards can quickly become your worst enemy when you can’t afford your monthly payments. With interest rates at around 18% and the economy still a bit shaky, paying off debt should be your first priority. Controlling debt can allow you to focus on other important financial goals.
Boost your retirement savings: According to a study conducted by Boston College’s Center for Retirement Research, Americans are $6.6 trillion behind in retirement savings. Use your tax refund to save towards your future. If your employer doesn’t offer a 401(k) benefit plan, open an IRA and start saving on your own.
Start a rainy day fund: Many of us have very little money stashed away for emergencies. Not to be a pessimist, but life can deal out some sucker punches—your tax windfall could help you recover from an unexpected emergency later.
Save to send your kids to school: It’s never too early to start saving for your children’s future. Start a 529 college savings plan or an Education Savings Account to help finance their education.
Invest in yourself: Enroll in classes to increase your earning potential and boost your marketability – or classes you’ve just always wanted to take (i.e. cooking, acting, etc.).
Reward yourself: You’ve had a long year, and it’s important to recharge your battery in order to stay productive. Instead of binging on a big ticket item, spend a little money on a reasonable reward for yourself (i.e. a massage, a nice dinner).
Despite the high unemployment rate this year, 13.2% of Americans are still willing to splurge on big ticket items with their tax refund checks. But putting your refund money to better use can make life easier in the long run. Help the HelloWallet community spend it wisely – share your ideas in the comments!