Did you get a tax refund this year? Before you splurge, make sure you’re spending it wisely.
From paying off debt to investing in your home, the choices are endless, but which gives you the biggest bang for your buck?
Consumer Reports breaks down the best ways to make every dollar count.
Whether it’s the child tax credit, an HVAC replacement, or you withheld too much on your paystub, getting extra cash from Uncle Sam is always a welcome boost.
But how you spend it can make a big difference.
Money expert Beth Blaisdell says your financial priorities should guide your next move, starting with knocking out high-interest debt like credit cards and loans.
Maybe choose one credit card to pay off so that you have cash flow for other things.
Next, stash it in savings. If you don’t have an emergency fund, you’re not alone. A recent U.S. News and World Report survey found that 40% of participants could not cover an unexpected $1,000 expense.
Blaisdell says even a small refund is the perfect jumpstart to building an emergency savings account.
Some people might think that if you’re only getting $500 back from your tax return, that’s not enough. But it doesn’t matter; you’re trying to create momentum.
Plan for this year and beyond: Will you need a home repair, new tires, or even a new car? Your tax refund can give you a head start on those big expenses.
Blaisdell said there’s nothing wrong with a little splurge like a nice coffee or dinner, but she warns against blowing your entire refund, which may not be worth it.
Finally, consider boosting your investments if you’re debt-free and have an emergency fund.
Pay your future self because your future self will thank you down the road. It’s the best way to make that refund cash grow.
Another wise way to spend your refund is to donate it. Find a good charity with causes you support and give back to your community.