Because of global shutdowns and economic problems from the coronavirus pandemic, the deadline for filing 2019 taxes was extended to July 15th. That gives you even more time to plan out what you’ll do with this year’s tax refund.
You might have some ideas in mind about how to spend your tax refund, and it can be tempting to go out on a shopping spree once the stores open back up. But now more than ever is a great time to consider how much more money you could end up with if you invest your refund or save it. If you’re not sure what to do with the extra cash, read on to discover 8 ways to spend your tax refund.
1. Treat Yourself
We’re listing this as the first option for spending your tax refund because it’s the most tempting. If you’re like a lot of Americans, being stuck inside the house with your favorite stores closed has probably left you with a wish list for when the stay-in-place orders are lifted. But, before you spend the extra cash on these types of purchases, consider some other options first to make sure you’re doing what it takes to become financially fit.
2. Pay Off Debt
Most debt carries an interest rate, and sometimes those interest rates are so high that it feels like you are never really making progress with your monthly payments. One option for spending your tax refund is to pay off, or at least make a significant payment, on your highest interest debt. This is called the Snowball Method and it helps you save the most money on interest rates over time.
3. Make Needed Repairs
Another great option for spending your tax refund is to use it to make repairs or upgrades to your home or vehicle. Investing in repairs and upgrades will save you money in the long run, and when it comes to your home, they can increase the value, helping you make more money when you’re ready to sell and buy a new home.
4. Donate to Charity
The numbers coming in regarding unemployment due to the pandemic are staggering. And many across the US and beyond have lost the source of their livelihoods, leaving plenty of opportunities for the more fortunate among us to make charitable contributions. If you’re in a financially privileged situation, consider donating all or a portion of your tax refund to charity. Just make sure you take the appropriate steps to only donate to established charities and avoid scammers.
5. Fund Your Emergency Plan
Many Americans are realizing the importance of an emergency fund. If you’ve been fortunate through this disaster but don’t have a fund set up to cover you and your family for at least six months should anything happen, then now is the perfect time to start that fund. Take our module to learn about emergency financial planning.
6. Invest in a Retirement Account
Do you know how much money you should have saved by now for your retirement? You can learn more here about how to calculate how much money your retirement savings should have during each decade of your life. If you haven’t met the savings goal of where you’d like to be by now, consider spending your tax refund by investing it into a retirement savings account like an IRA.
7. Deposit It Into a High-Yield Savings Account or CD
It turns out, the most common way to spend a tax refund is by saving it. Half of Americans are planning on saving their tax refund this year. And if you’re smart about where you save your money, you could end up making even more. Depositing into a high-yield or CD account can earn you extra cash through interest over time.
8. Go Half and Half
Can’t decide how to spend your tax refund? Once you know how much you’re going to get back, plan out how you can split the money between some things you really want and ways to invest it to earn some more money over time. Depending on your financial situation, there’s no harm in making a purchase to brighten your spirits after being stuck inside for so long.