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Make Your Tax Refund Work For You

The majority of Americans receive tax refunds from the IRS. On average, the typical American filer receives a refund of just under $2,000.  Many can’t wait for the funds to arrive in the mail or via direct deposit so they spend the extra dollars. The rush received from those purchases will probably leave you as quickly as the memory of what you just purchased. 

So later this year when your refund arrives, why not chose to do something bold and new?  Invest in yourself in a different way. Think about using your refund for a longer-term investment and gain greater satisfaction. Here are a few suggestions for investing your refund in a way that benefits you. There is sure to be at least one enriching idea applicable to your life situation -- no matter how much, or how little, your refund may be.

  • Review your credit cards.
    Which bears the highest interest rate?  Whichever holds the highest rate, consider paying at least a part of your refund toward the balance. Reducing the amount of high-interest debt will save you money.
  • Review your property for areas that need fixing.
    Pay particular attention to areas that if not tended to now, will result in a higher expense later. Start by listing items that now need small repairs and sort according to cost to repair now versus future repair cost.  Applying some of your refund to needed improvements helps you avoid paying more in the future because the wear and tear is greater.
  • Review your dreams.
    What is it you’ve always wanted to do? Investing in yourself is truly beneficial.  This calls for you to look at how you would like to improve or build upon ‘you’ and then act. Examples are:

    • Would you like to improve your health by taking a fitness or yoga course?
    • Have you ever thought about learning a foreign language?

In contrast to simply using the refund to buy specific items that quickly depreciate, such as a new stereo or clothes, self-improvement investments last a lifetime.

  • Review your retirement savings.
    Do any of your accounts need a little extra? These savings vehicles provide the critical basis for your retirement financial life. And, after the economic hit to retirement accounts over 2009 and 2010, any extra addition beyond normal the contribution is sure to help.