If you have already filed your taxes and found out that you’re getting a refund this year, you might be wondering how to use this amount, right? Read below our tips for 6 smart things to do with your tax refund!
1. Create an emergency fund for a rainy day
Many people don’t have enough savings accessible in case of a financial need, like a job loss, a medical emergency or even a pandemic, which can force one, for instances, to seek out loans at high interest rates or to borrow money.
How much you need, and what an ‘emergency’ is, will depend on your situation. Ideally, your emergency fund is at least 6 months’ worth of your living expenses. So if your monthly expenses are, for example, £2500, you will need £15,000 in your emergency fund.
Unexpected expenses happen all the time. Unless you are catastrophe-proof, there’s no such thing as too much savings for your emergency fund!
2. Reduce debt (and the anxiety that comes with it!)
This is probably one of the best things you can do with your tax refund, since there is nothing worse than being weighed down by debt. Using your tax refund to pay off debt is not that bad – after all, you’re using your “free money” to do so!
Besides from this, it’s important to develop a budget to track expenses if you’re trying to get out of debt! Also, if you have multiple bills to pay, paying off the debts with the highest interest rates first will reduce the amount of money you owe in the long run.
3. Repair your home and your car
Maintaining and repairing your home helps increasing its value, but it’s also essential to boost your life quality and happiness. Not to mention, there are a lot of affordable renovations that can help you save money over the long run, such as installing more efficient appliances, for example.
The same applies to your car! If you have been ignoring some car repairs, this is the time to consider spending some of your tax refund on fixing it. Doing so might save you a lot of money down the road!
4. Invest in yourself
If you aspire to broaden your educational horizons or add to your skills base, enroll in a certification class that can help you move up at work or even start at a new job!
5. And also in your business!
If you’re self-employed and could use a computer upgrade or a workspace improvement, you can use your tax refund to invest in any of those. This will not only improve your ability to generate more income and be more comfortable while working, but it will also provide some tax benefit for next year tax submission!
6. Invest in the stock market
We know that, historically, the stock market has offered greater return on investment than savings accounts. While this is not a risk-free choice, the long-term commitment makes it a good option if you don’t have any financial needs right now. Index funds tend to be less risky than individual stocks, since you are diversifing your portfolio. The fees are also cheaper, which makes it a good option (at least to start!)
On the other hand, if you have not submit your taxes yet, Tommy’s Tax certified accountants are here to help!
Download our app and submit it today!