12 Smart Ways to Spend Your Tax Return

Are you getting a tax refund this year? Before you spend your return on a new shiny object, pause and take a moment to understand there might be better ways to spend your tax return. Your tax return can be a great opportunity to make a smart investment in your life. In fact, there are many smart ways that you can spend your tax return. You might thank yourself later by not blowing your return on indulgences, like a new cell phone or big screen television.

Smart ways to spend your tax return

Here is a look at 12 top ways you can make the most of your annual check from Uncle Sam.

  1. Pay off existing credit card debt
    If you have credit card debt, you could use your refund to pay it down or even pay it off. Credit card debt might eat up a lot of your paycheck each month, especially if it has a high interest rate. Use your tax return to pay down your debt. This could free up your future paycheck to invest or save for a financial emergency.

  2. Making car or home repairs
    Whether you need to get a new alternator for your SUV or need to fix a leaking pipe in your bathroom. Your tax return could come in handy. Use your refund check to make any essential repairs on your car or home to help your car last longer or improve your home’s value.

  3. Fund your retirement account
    You don’t want to be caught short on money when it's time to retire. By putting some or all your tax refund in your 401K or Roth Individual Retirement Account (IRA), you might be able to invest and grow your retirement fund.

  4. Create an emergency fund
    You never know when you are going to need a couple hundred or even thousands of dollars on a moment’s notice. That is why it is a great idea to set some of your tax refund money aside for emergencies.

  5. Donate to charity
    Do you have a cause that you care about? You can donate a portion of your tax refund to your favorite charity. Best of all, many charitable donations are tax-deductible. This is just another way that your tax refund money goes further than you would expect.

  6. Upgrade your career skills
    One of the best investments that you can make is in yourself. You can use your tax refund for continuing education or trade school. Doing so could help you land a better paying job and greatly improve your career prospects.

  7. Get an elective procedure done
    Do you have a nagging hip or poor eyesight? You can use your tax refund to help fund any elective surgery that could improve your health and help you be more productive.

  8. Buy items in bulk
    Billionaire Mark Cuban recommends that people buy items in bulk. That is because bulk items have a much lower cost per unit than buying items individually. So, if you go through lots of toilet paper, paper towers, rice, dog food, or other items with a long shelf life, get them in bulk.

  9. Start a side business
    Looking to make an extra income? You can use some of your money to start a side business. In fact, there are several side businesses that you can start that can earn you hundreds or thousands of dollars each month.

    Who knows? Your side business could turn into your next big career move.

    Here are some businesses that you can start for less than $1,000:

    - Flipping items - Buy items at garage sales, fix them up and sell them on online. Starting capital can be $50 to $1,000.

    - Vending machine business - Buy gumball or toy vending machines and place them inside commercial spaces. Starting capital can be $400 to $10,000 or more.

    - Blogging - You can start a blog and sell ads on your blog once you build an audience. Starting capital can be as low as $100 to $200.

    - Drop-shipping - Open an online store and sell items that you purchase from wholesale sites. Starting capital can be $50 to $500.

    - Build a social media presence - Start a YouTube, Instagram, or TikTok account and share your expertise or experience. After building an audience, you can make money from ad revenue or selling merchandise. Starting capital can be $50 to $100.

  10. Buy life insurance
    Make sure that your family is taken care of after you are gone. You can use your tax refund to purchase life insurance. This could give you and your loved ones the ultimate peace of mind.

  11. Pay down your car loan
    If you still owe money on your car, pay off as much as you can. The sooner that you can own your vehicle outright, the more comfortable you might feel. That is also one less monthly payment that you have to deal with and could focus that money on paying down more debt or fund your savings account.

  12. Pay down your mortgage
    Build equity in your home by making an extra mortgage payment or two. Reducing your mortgage’s principal will reduce the overall amount of interest paid. The faster you can build equity in your home, the better.

Make the most of your tax return, while you can have fun going on a shopping spree with your tax refund, you could make incredible improvements to your life by spending that money wisely. Consider one of the above ideas as inspiration to make the most of your tax refund.

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