Tax season has come and gone, which leaves all of us in one of two camps: Those who got a refund, and those who had to pay up. If you’re reading this, you may be one of the lucky folks who got a refund. Congrats! But, that begs the question: What should (or shouldn’t) you do with that money? Today, we’re going to walk you through a few of our tips for how to approach your newly padded wallet!
- Think of a refund as the government paying you back money you loaned them.
Now that the government has returned this ‘loan’ to you, you should put it to good use! Consider putting it towards things that will benefit you in the future. For example, putting it into your savings/emergency fund for a rainy day, using it to increase your payments to your employee-sponsored retirement plan or to open a retirement account if you do not yet have one; or using it to put into an education fund for yourself or your child. There are many options, but the key denominator is strategic use for future benefit! - Stay away from using your refund to pay down debt.
While using this influx of cash to pay off debt may seem tempting, it is ultimately better to develop and stick to a debt paydown schedule that works with your take-home pay. Generally, it is recommended to use additional or unexpected inflows of money to build up your assets rather than pay down your liabilities. - Use the money to reinvest in your business.
This tip is aimed more at business owners and freelancers, but is great to keep in mind. This is the business equivalent of individuals using the refund to increase their assets - You can consider using it to buy new equipment, upgrade software, build cash reserves for an emergency or rainy day fund, invest in employee benefits and development, and more! There are many ways a refund can be used to benefit the future of your business.
These are only some of the many great ways to put your refund money to work to benefit you! To find out the best option for your unique situation, it’s worth it to sit down and take the time to research your options. Even better, it is a wonderful idea to consult with a financial professional to help you make an informed decision with your money! No matter what you choose, congrats on your savvy tax planning, and here’s to a great new tax year!
