The tax season is upon us. Most of us will be receiving a refund check. Over the past two years, the average income taxrefund has been slightly over $3,800. Most people will receive their refund check within three weeks of filing their incometax returns. Here are the 5 best ways to spend your income tax refund.
- Pay Off Credit Card Debts and other High Interest rate loans: The best way to give yourself a quick raise is by paying off some of your debts, especially the ones with high interest rate. Some credit cards have interest rates as high as 23% and some car loans are as high as 15%. Paying these off will save you thousands in interest payments and give you the flexibility to enjoy your income on other things.
- Build Your Emergency Fund: Over the past year, there are have been significant layoffs, job cuts and income reduction. A lot of people have raided their emergency fund to make ends meet. For a lot of people, getting the income tax refund will be an opportunity to rebuild this emergency fund. Most experts agree that having a 3-6 months of your expenses in liquid assets is essential to a concrete financial plan.
- Pay down your Mortgage, Buy a Home or Invest In Real Estate: Investing in some form of real estate is probably the best financial decision most of us will ever make. If you currently have a mortgage, paying it down to reduce your principal will be a shrewd way to increase your wealth and save on interest payment. If you are still renting, using your income taxrefund for a down payment on a home is an excellent way to build wealth and save money from renting. If you have ever wanted to invest in an income producing real estate, now is the time to do it.
- Give to others: There is a popular saying that it is better to give than to receive. Another research also says giving money away also increase your happiness. If you have all your financial basis covered, giving to others or charities will be a great way to spend your income tax refund.
- Increase your retirement savings: One of the major pillars of most financial plans is to reduce your taxes and building wealth by contributing to your retirement account. Using your income tax refund to boost your retirement fund is an excellent use of your income tax refund.
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