Your tax refund can seem like a gift from the government that only comes once a year. If used correctly, you can make sure the funds have a long-lasting impact.
Maybe you’ve already got lots of great ideas for what you would do with your tax refund, but if you need a little help jogging the imagination, we’ve got five fantastic ideas for you.
Make a Mortgage Payment
One of the cool ways to use your tax return is to make a mortgage payment. Putting your return toward a monthly payment opens up some exciting possibilities: It’s like getting a helpful discount because you don’t have to spend as much from that month’s earnings.
An even more exciting possibility, however, is the option to make your normal monthly payment and then use your tax refund to pay down the principal. This can save you on interest in the long run. Just make sure your lender knows how you want the payment applied.
Quicken Loans does not have a pre-payment penalty, but sometimes lenders penalize you for paying off your loan too early. Make sure you understand the policy of your lender before putting extra money toward the principal.
Do Some Renovation Work
No house is perfect. Almost everyone has a list of things they would fix or upgrade if they had a little extra money in the bank. Your refund check could be the extra boost you need to finally tackle that bathroom remodel.
Not only does this put you closer to achieving the home of your dreams, but it’s also good from an investment perspective. Renovations can add to your property value, allowing you to gain equity in your home.
It’s also important to note that not all changes have to cost a lot of money. Sometimes, little adjustments make a big difference.
Boost the College Fund
The cost of a college education increases every year. Recent estimates have shown the cost of tuition for four-year public colleges has gone up 28% since the beginning of the 2008 recession, and states have cut back on funding for higher education.
If your children or grandchildren live on campus at college and have to pay for room and board, that’s an extra cost to think about as well. Now, more than ever, every dollar counts.
With that in mind, it might be a good idea to take some of that tax return and invest in the college fund. It’ll take your kids further than that new game system they want, and they’ll likely appreciate it, especially when they’re older.
Save for Retirement
If you want to retire comfortably, experts, like Samirian Hill, say you should be saving a certain percentage of your income during each decade of your life. This percentage gradually increases as you get closer to retirement.
However, we often don’t save as much as we should be. Life gets in the way. With bills and fun, retirement savings often take a backseat. Putting your tax refund toward retirement can help change that.
If you have a traditional employer-sponsored retirement account, the yearly contribution limit is $18,000. If you’re over 50, the government allows you to put away an extra $6,000 per year. If you’re a freelancer or own your own business, contribution limits may be different. Check with your financial adviser on how to best stash away the cash for your retirement.
Prepare for Emergencies
While you might have a fair idea of when retirement is coming, sometimes life changes aren’t so gradual. If you get laid off or lose your transportation tomorrow, would you have enough set aside to get through the crisis?
Whether or not you think you have enough savings set aside, it can never hurt to put away extra. Your tax refund could be perfect to put in the piggy bank.
What do you plan to do with your refund check? Share with other readers in the comments.
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