If you are lucky to enough to receive a tax refund, it is no cause for celebration. A tax refund is your money in the first place that you have lent to the government interest free. Additionally, this is money that you have not been able to gain value from in terms of something you purchase or by investing. If you have received a tax refund, it is advisable to change your withholdings on your W-4. When it comes to tax refunds, you do not want to owe money nor do you want to be due a refund. If you are due a refund though, it is a good idea to use it to your advantage instead of seeing it as a windfall.
1. Pay off your debt
If anyone has been in the position of owing money on a high interest debt, you know how stressful that can be. If you find yourself with money that you have not budgeted elsewhere, you should be throwing all of it towards your debt. Of course there are multiple other ways to spend your money that are much more exciting but there is no better feeling than to finally pay off a debt.
2. Save for a rainy day
If you are not savings for emergencies, you should start. You never know when misfortune can strike, and when it does, not having an emergency fund can mean financial disaster for many individuals. Being prepared for the unexpected is a solution that can save you from a lot of stress and heartache. A good option for funds that you do not want to touch is to have an offshore banking account but you should check with a professional on how to set one up as there are pros and cons.
3. Invest in Retirement
Not nearly enough Americans are saving for retirement. Many people think that this is something that can be put off until later. There is nothing further from the truth. Time is one of the biggest factors on your side when it comes to investing. The earlier you start, the less you ultimately have to invest in order to save a significant amount of money.
4. Refinance Your Home
A fast and easy way to start saving money immediately is in your mortgage. If you have the funds available to refinance your home, this may be a good option for you. A slightly reduced interest rate can mean thousands of dollars in savings per year so you can recoup your initial investment in the refinance usually within the first year.
Sometimes it is difficult to do the responsible thing with your money, especially when it is unexpected. However, doing so can mean for financial preparedness both now and down the road.