Every year, millions of Americans receive billions of dollars back in overpaid taxes in the form of a tax refund. A tax refund marks a great chance to set yourself in a better position for the future. If you’re getting a windfall from the IRS, here are a few ways to use it wisely and get ahead financially!
- Expand Your Emergency Fund– If you don’t have one currently, aim to set aside $1,000 as an initial milestone. Once you reach that, transition to thinking about your emergency fund in terms of how many months’ living expenses it can cover. If you spend $4,000 per month and have $8,000 in an emergency fund, it can cover two months’ expenses.
- Pay Off Credit Card Debt– Try the debt snowball method to knock out your credit card debt quickly. It involves putting all your available money toward your smallest debt first while making the minimum payments on other debts. Once you pay off that smallest debt, you then start putting all your money toward the next-smallest, and the next, and the next. You can apply this to other debt you may have.
- Start Your Own Business– A tax refund can provide the start-up money to build up inventory, design a website or online store, or otherwise allow you to turn a hobby into a money-making enterprise.
- Further Education or Certifications to Advance Your Career-Whether it’s a new certification, degree, license, or some other qualification, use your tax refund to help you reach your career goals. This investment in yourself can lead to that raise or promotion you’ve been pursuing, or help you secure a new, better job entirely.