Invest it, splurge or pay off debts? Plan now for how you’ll handle that tax refund

Although tax day has been pushed back a bit because of the pandemic, we are still in the middle of tax season and millions have already filed. Studies have shown that many people now expect tax refunds as a part of their annual income, and no matter how big or small that refund is, there are plenty of ways to put that money to work. As our refunds start to appear in our mailboxes and bank accounts, here are a few ways you can use that money wisely — and maybe even get more out of it.

Plan for the future

This past year has shown us that having your finances in order is more important now than ever. Whether you are adding to your existing savings or creating an emergency fund, this is a great time to boost your nest egg and strengthen your security net. You could also use the money to open a high interest savings account or put it up as collateral for a shared or CD secured loan. These cost-effective options can improve your credit score while also helping you earn interest and get more from your money.

Debt pay down

Applying your refund right to an existing debt balance is one of the smartest financial moves at your disposal. Obviously, if you have struggled throughout the pandemic and have other bills that must be paid, it would be better used for those. However, if you are fortunate enough for your regular budget to be intact and have the refund as just some “extra” income, it would be a welcome chunk in your debt payoff plan.

Investments

If you are interested in entering the world of investing, this could be great seed money to get you started. Since it is not money that you may have factored into your daily expenses, your risk will be lower, but your reward could stay the same. Contact a financial adviser to help you determine the right move for you.

Spend it on yourself

Before you write this off as not a “wise” way to use your money, consider the investment potential of you. When you are happy and well, both mentally and physically, you will probably get more out of your time and your efforts. In the long run, splurging a little bit on yourself could pay off — and who doesn’t deserve to treat themselves after the wild year we have had?

Donate

Feeling philanthropic? If you are not in any need of the money, or see it as “bonus” funds, consider putting it back into the community to do some good for everyone. Since what goes around comes around, you could even look for a charity that offers tax deductions.

It is not the size of your refund that will matter in the long run; if you are putting it toward the right goals, then every dollar amount will pay off in the end. Consider your budget, your debt and your happiness in deciding what to do with your refund this year.

Kat’s Money Corner is posted on Dollars & Sense every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, visit http://communityamerica.com.