So, you filed your taxes, read up on important things like itemizing and what happens if you file your taxes a day late, and now you have a refund coming to you? That extra money can come in handy, especially if you’re smart about how you spend it. Here are five ideas for what to do with your tax refund:
Pay off debt
While it can be tempting to spend the money from a tax refund on a new car or a fancy vacation, often, one of the smartest things you can do with a windfall is pay off debt. This is especially true if you have high-interest debt, such as credit card debt. By paying off your debt, you’ll be able to save money on interest charges and free up more money each month to save or spend as you please. So, before you go on that spending spree, consider using your tax refund to get out of debt.
If you’re looking to make your money work for you, it might be a wise move to add that cash to your savings. Putting your tax refund into an interest-bearing savings account is a great way to build up your emergency fund or save for a big purchase, like a down payment on a home or a car. If you don’t have a savings account, getting a big chunk of money is a good occasion to open one. Just be sure to shop around for the best interest rate.
Take a trip
If there’s a trip you’ve been wanting to take for a long time, an infusion of cash can be the impetus to take it. Depending on the size of your refund, you might be able to cover airfare, lodging, and even meals. Not only can you experience new cultures, see amazing sights, and make new memories, but traveling can also help you to relax and de-stress.
Donating your tax refund is a great way to support a cause you care about. A charitable donation can also become a nice tax deduction come next April (assuming you itemize your taxes). Do your research and choose the nonprofit organization that best aligns with your interests. Whether you’re supporting the arts, the environment, your community, or animal welfare, or something else, there’s sure to be a charity that would love to have your donation.
Invest in professional development
One of the best things you can do with your tax refund is to invest in yourself by taking a class to learning a new skill to expand your professional development. With the extra money, you could enroll in an online course, sign up for a workshop, or even attend a conference related to your field. Not only will you come out of the experience with new knowledge and skills, but you’ll also show a commitment to continued learning that may impress future employers. If you’re not sure what classes to take, ask your friends, coworkers or family members for recommendations, or do some research online. There are plenty of options out there, so you’re sure to find something that interests you.