(ThySistas.com) When you receive an unexpected windfall courtesy of a tax refund, you probably have all manner of weird and wacky ideas for your money. You might spend it on a night out with friends, a shopping spree, or sweet treats to fill your pantry.
However, as tempting as it can be to go crazy with your cash, being sensible with your money may be a better choice. If you’re stuck for ideas, consider the smart spending tips below:
An Emergency Fund
After using an income tax calculator to get an idea of the refund you can expect, you may find yourself with hundreds or even thousands more than you expected to have. Since most people don’t have money set aside for emergencies, consider doing just that.
Car repairs, house maintenance, and unexpected travel for ill family members can all pop up when you least expect them. If you have money set aside for such situations, you may be able to avoid having to rely on costly credit cards and bank loans.
Pay Down Your Mortgage
Ask any financial guru, and they will tell you that one of the wisest things you can do is pay more than the minimum payments on your mortgage. Over the course of your mortgage, which is generally up to 30 years, you can save tens of thousands of dollars in interest by making extra payments.
Depending on your mortgage structure, you may not be able to make large payments without financial penalties. In that case, you may prefer to set the money aside until the time comes to restructure your mortgage.
Invest It
With advice from investing experts, you may be able to find a suitable investment option to grow your money in the months and years to come. The stock market is usually an ideal place to begin, with plenty of apps and sites for beginners and seasoned professionals alike.
It’s important to note that stocks can require a long-term investment. You typically can’t expect significant gains within weeks, or even months, of making your investment. However, most people see returns of at least 10% a year, which has been the ‘average’ for the last century.
Pay Off Your Debt
The average American has around $90,000 in debt consisting of credit cards, mortgages, personal loans, and student debt. While your tax refund may be small in comparison to some of your debts, making cash contributions above and beyond your regular payments may save you a considerable amount of interest.
You may not be able to have fun with the money, but you’ll be a whole lot closer to paying off your debt and being free of it in the future.
Start a Business
One of the biggest hurdles many entrepreneurs encounter is finding startup funds. Banks aren’t always interested in funding businesses that aren’t a sure thing, and even investors want to see projected future success before they open their wallets.
Therefore, when you find yourself with a tax refund, you might see the value in setting it aside for your future business venture. Many business models require minimal investment, so even a few thousand dollars set aside might be all you need to hit the ground running.
While it can be tempting to spend your tax refund on fun things like new clothing and treats, making intelligent financial choices can be much more worth your while. After calculating your refund, consider putting your money toward one of the suggestions listed above.
Staff Writer; Sherry Parker