As we approach the upcoming tax season, many will begin thinking about what to do with their tax refunds. It is wise to begin thinking about how to spend that money now; otherwise, it’s easy to end up spending it frivolously. You can use your income tax refund to do a number of things including making investments, paying off a credit card, or paying off a car title loan balance. Here are some ways to use your tax refund wisely.
Pay Off Credit Cards
If you are like most American households, you have a balance on at least one credit card. When you receive your tax refund, use it to pay off or, at least, pay down the balances of the credit card(s) with the highest interest rates. Pay off the card with the highest rate first, the next highest second, and so on to get out of debt.
Pay Property Taxes
If you are a homeowner, you must pay property taxes. In most municipalities, you pay taxes twice per year. Using your tax refund, you may be able to pay your current tax bill and save the rest for the second installment. It is not a fun way to spend your tax refund, but paying your property taxes will prevent you from dipping into savings or borrowing to pay them.
Pay Off Your Car Title Loan
If you took out a car title loan from Embassy Loans, it would be wise to pay the balance off and save money. By paying the balance off, you end the interest payments on your loan and get rid of a major debt burden. With the loan paid off, you free up cash to be put toward other debt, to be saved, or to be used for something like a vacation.
Invest Your Tax Refund
You could start a college savings fund for your children with your tax refund. As the cost of college continues to increase, you can get a jump on paying for it with a 529 Savings Plan. These plans allow to invest, tax-free, in your children’s education.
Or, instead of a 529 plan, you could start your own emergency savings fund. Every household should keep an emergency fund with roughly three to six months’ worth of wages or salary. In the event of an emergency, this money is available. It could help a family get through a job layoff, for example.
Whatever you decide, be wise with your tax refund. Take care of your obligations first. With any leftovers, you always have the option of splurging a little on yourself.