This YouTube video is from Money Talk News.
The average American will be receiving a tax refund just north of $3000 this season, according to the IRS. The ways people spend this amount vary greatly, from personal indulgences to savings to giving to charity.
However, financial experts, as well as a little common sense, tells us that there are good ways and bad ways to spend this annual windfall:
- Donate to charity. Not only does it help those in need, it also helps leverage your money by giving you a deduction for next tax season.
- Pay down high interest debt. Nothing eats away at savings like high interest, so nip it in the bud and eliminate this pesky expense.
- Add to your emergency fund. It’s always a good idea to save for a rainy day, and there’s no easier way to do this than by socking away a lump sum at tax time.
- Boost your retirement. With retirement, slow and steady wins the race, but adding in an occasional lump sum can push your goals into overdrive.
- Make yourself more productive. Taking a class or starting a business can give you tangible rewards in the form of future earning potential.
- Invest your money. Opening any brokerage account, especially something like an IRA, gives you savings, growth, and a possible tax write-off.
- Putting it towards new debt. You just got a lump sum of cash; don’t replace it with a high-interest loan on a depreciating asset.
- Give it to someone who won’t repay. Just because you are able to doesn’t mean that you should. If you loan a friend or family member some cash, be sure you are certain they are able to pay it back.
- Temporarily live beyond your means. Just because you can afford something at the moment doesn’t mean you have the long-term financial ability to maintain the lifestyle that comes with it.
Bottom line: don’t look at your tax refund as money that you found. It’s your money; you worked hard for it. Be sure to now let it work hard for you!