I recently wrote a little warning about not wasting your refund. I know, I said I wouldn’t tell you what to do with it- just figure out how to use it wisely. But maybe you’re stumped. Here’s a quick list of ideas to get you started. Mix and match, pick one, pick all, or none at all.
1. Build Your Emergency Fund
Don’t get caught off guard by life’s surprises. If you haven’t started an emergency fund, your refund is a great way to get it started! And if your emergency fund isn’t quite big enough, bolster it with your refund.
2. Start a Retirement Fund
Retirement savings is one of those things that we like to keep kicking down the road. One excuse many people like to use is that many retirement fund options have a minimum opening investment amount. Typically the amount is between $1,000 and $3,000. If your refund isn’t quite that large, it at least gives you a jump start to saving to that opening amount.
If you already have a retirement fund going, consider adding part or all of your refund. You’d be amazed how much your refund will grow in 30 years!
3. Pay Off Debt
If you’ve got debt lingering, make it go away! If you’ve already got a debt payoff strategy in place, your refund will just speed up that strategy! Obviously mathematically, it makes sense to pay down some of your highest interest debt, but if you just want a quick win of entirely eliminating a certain debt, that’s fine too. Even if your only debt is a mortgage, your refund could possibly knock a few months off.
4. Build Some Passive Income
Like the idea of money rolling in quarter after quarter with no effort on your part? Invest you refund in a stock or bond fund that pays a healthy dividend. Or if you really want to get hands on, buy a mix of individual dividend paying stocks through a no-fee brokerage such as Loyal3 or Robinhood. Just be sure you’re investing for the long haul!
5. Tackle Some Home Improvements
Home maintenance projects often have a tendency to get kicked down the road. And even if you’ve tackled the necessary upkeep, there are always other projects that can increase the value of your home, make your home more livable, or increase the efficiency of your home. Put in some new windows, tackle some landscaping, or if you’re really feeling ambitious, put in some solar panels.
6. Go on Vacation or Do Something Fun
Maybe you’re happy with your emergency fund, retirement savings, debt situation, income and investments and home condition. Don’t feel like you aren’t allowed to do something fun with your refund. After all, it is your money! Perhaps, the way you budget for vacations is by planning to use your refund or vacation. Or go on a family outing. But just because you’re using it for something fun, doesn’t mean you’re wasting it. Just don’t use it frivolously because you don’t know what else to do with it.
If none of these ideas catch your fancy, check out this list of things you can buy that pay for themselves.
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- While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.