If you’re like most people you can expect to receive an annual tax return between $2,000 and $3,000. While that’s not exactly a life-changing sum, it is enough to shore up your financial situation a bit if you use it wisely.
Here are 7 smart things you can do with your tax return:
1. Start an emergency fund. Most people don’t have an emergency fund and if you’re one of them you could be in trouble if you suddenly find yourself out of work. Set aside your tax return to start an emergency fund or add to one you already have.
2. Pay down your debt. It may just be a drop in the bucket compared to what you owe, but your tax return can at least put a dent in your credit card debt.
3. Make a principal-only payment on your mortgage. If you can manage to do this annually you’ll pay off your mortgage years early and save thousands of dollars in interest. Just make sure your lender applies the entire amount to principal.
4. Start a college fund for your kids. Face it…college isn’t cheap and it’s getting more and more expensive every year. Take your tax return and open up a 529 plan to help pay those expenses when your little ones are older.
5. Sock it away for retirement. Open up an IRA account for you or your spouse (or both) and deposit your tax return so it can grow until you’re ready to retire.
6. Use it to improve yourself. Take a class and learn something new. It’s important to invest in yourself…improve your skills, make yourself more marketable and increase your earning power.
7. Send it to me as a gift! Just kidding…I’m sure I could put your tax return to good use but you’re better off using it to improve your own financial situation.
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