In life, two things are certain and inevitable: we will all die one day (which is bleak) and we all have to pay taxes, whether we like it or not.
If you are one of the lucky individuals who’s received a tax refund, then that’s fantastic! But it’s important to be mindful of how you will use your tax money, and it’s imperative that you use the money effectively. While a tax refund is a bonus, it’s also a useful tool for getting ahead and achieving your financial goals. In fact, you can save your tax refund and use it to pay off taxes in the next tax year.
Here are some of the smart, useful and helpful ways you can budget your tax refund for necessary uses.
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1. Save
Put the tax refund away for a rainy day. It could be your emergency fund for later on down the line. Put your tax refund into high-interest savings about - preferably one that doesn’t allow for unlimited withdrawals.
2. Invest
You can use your tax refund to invest in something important in your life or as expenses towards things like business equipment and work travel. You can also use your tax money to invest in huge financial decisions like a retirement plan, a business or real estate.
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3. Pay down your debts
If you have any outstanding debts, pay those off. Paying off your debt should be your first priority because it can affect your credit score if not paid off.
4. Keep for the next tax year
As previously explained, you can keep the tax refund for the next tax year and use it to pay off any taxes you owe in future.
5. Use it as a ‘fix’
No, we’re not saying you should use it as a way to fund an addiction or obsession! But if you have anything that needs fixing or repairing - such as your car or home - then you can put your tax refund towards those instead.
6. Prepay
Get ahead of yourself and prepare important finances, such as bills, loans, and mortgages. By doing this, you can take the stress off your finances for a while and give yourself some breathing space.
By taking these tips on board, you can budget your tax refund and use it wisely.