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Stuck on how to use your 2017 tax refund? Consider these 5 options
Tax season has officially arrived. While the thought of having to file taxes may elicit groans, the thought of receiving a tax refund can bring excitement and dreams of how to spend it. Before you plan any major purchases, it may be a good idea to examine other options for your tax refund.
5 ways to use your 2017 tax refund
- Pay down debt. This may not be the most exciting option for a tax refund, but paying off or paying down bills now means less of your monthly income will be used to pay bills in the future. Whether it’s paying off credit card balances, a car loan, or making an extra mortgage or student loan payment, taking steps toward reducing debt is never a bad idea.
- Put it in a rainy day fund. If you’re comfortable with your debt, putting your tax refund in savings may be a good idea. It is generally recommended to have between three and six months saved up in an emergency or rainy day fund. If you do not have that much in your savings, your refund will no doubt put you closer to that number.
- Putting your money to work for you is always a wise choice. Although this means you can’t use it immediately, investing your tax refund – whether in a 401(k), Roth IRA or the stock market – may help make the amount grow faster, giving you more money to use in the future.
- Use it for a large upcoming expense. Everyone has projects, such as home repairs or renovations, to complete. Such projects can be costly, and we don’t always have the funds immediately available to complete them. Saving a tax refund opens up the possibility of putting that money toward one of those projects and crossing it off your to-do list.
- Donate it to your favorite charity. If you are comfortable with your savings, debt and investments, and don’t have a large project you want to complete, using your tax refund as a charitable donation can allow you to support a cause that is close to your heart. You can also receive a charitable tax deduction on next year’s taxes, meaning you will owe less on your 2018 taxes.