“A vacation? … well, may be. Credit card bill, or maybe the long-standing debt … forget it, vacation it is!” This is the effect that extra cash, read Tax Refund, has on our brain.
While you might be very tempted to go all out and splurge, getting a tax refund is a great opportunity to improve your life and well-being, as well as your finances.
While we’re in no way telling you how to use your tax refund — since, let’s admit it, it’s your hard-earned money after all, we got you 7 wise money moves you can make with your tax refund.
Invest in your Financial Future
- Pay off your Debts
Paying off your debt can be just as satisfying as taking a vacation. As per many finance websites, an ideal Debt/Income ratio should not be more than 33%. So, use your tax refund to reduce or eliminate any high-interest debt that you’re carrying — payday loans, title loans, high-interest student loans, car loans, or credit card debt. But be sure to do so while retaining just enough cash for yourself.
2. Pay Down your Mortgages
If you’re an expat with mortgages in your home country or abroad, send your tax refund to your mortgage lender to make an additional payment on your mortgage. It will be worth it when you pay off your home sooner than planned. If you’re happy with your mortgage rate, look around the house for any home improvements that can immediately increase the value of your property while simultaneously making your home more comfortable.
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Invest in Yourself
3. Go on, Take that Vacation … or Start a “Sunny Day” Fund
That’s surely the first thought you had. Don’t feel guilty about possibly using the extra cash for a vacation or to treat your family out to a nice dinner.
But if it makes financial sense for you to invest your tax return in a “sunny day fund”. You can deposit your refund into an account set up for the purpose and add to it over time. Studies show that we value memories much more than we value resources — but remember a $500 refund should not excuse for a $3,000 trip.
4. Improve Health & Well- Being
Is there an operation, doctor’s visit or a procedure you or someone you love has been putting off? Braces for the kids, dentures for grandma or sleep apnea for yourself? It may also be the car trouble you have been ignoring or the new winter coat you really need.
Tax refunds can provide the perfect opportunity to take care of some important, overdue, but essential expenses.
5. Get your Business Going
Do you have a venture that you want to start? Have you been looking for seed money to take your business to the next level? You can use your refund to make the next big move. It’s a great opportunity to turn your refund into income for years to come, and get some more small business tax deductions next year as well.
Invest in Happiness
6. Get your parents to splurge
Getting your tax refund could be a great opportunity to help a loved one or a friend in need. You can send some funds to your retired parents so that they can splurge on something they have been meaning to do for a while. Or you could even send it to a friend who could really do with some extra cash at the moment. Just be sure to get the best FX rates while doing so.
7. Invest in greater good
If you are a busy professional, making charitable donations can unfortunately slip down on your list of priorities. Your refund can give you a chance to give a little back. Contributing to charity is an can be excellent use of capital, and provides a huge societal upliftment. Although the returns on this investment of yours may not be as rewarding as investing in the financial markets, giving to charity will benefit your community.
Whether it’s a massive waterfall or just a drop in the ocean, tax refund surely feels like “found money” — and you can put it to work for yourself wisely and improve your financial situation. Treat yourself — just don’t blow it on a huge, unnecessary splurge.