This time of year is when many people file their taxes in hopes of getting a tax refund. A tax refund is free money you get back when you file your taxes. A better way to get your tax refund is to increase your tax withholdings and get your money back during the year.
Getting your tax refund at the end of the year helps the IRS make money but may not help you as much as you think. Some people are not very disciplined and when they get a large sum of money them don't spend it wisely. In some cases they are worse off with the tax refund than they were before they got the refund.
Don't make that mistake. Use your tax refund wisely and improve your financial situation. Do even better next year than you did this year. Here are 8 ways to spend your tax refund.
1. Pay down debt. Pay down credit card balances first, then pay collection accounts, judgments, liens, then pay extra on any loans.
2. Create an emergency fund. Create a savings account to cover bills for 9-12 months.
3. Invest it. Start a retirement account. If you don’t have a retirement account with your employer sign up tomorrow. You can also start you own individual retirement account in addition to your employer account.
4. Save for your children's college education. If you haven't already done so start saving for your children's college education. College tuition increases at 3 times the rate of inflation. Put the money in a 529 plan.
5. Purchase a home. Now is a great time to buy a home. Use the money to put towards down payment and closing costs.
6. Repairs. If your home need major repairs use the money to fix them.
7. Increase job skills. Take an inexpensive class to boost your skills at work. This can help you find a job or increase your chances of staying employed.
8. Donate. Make a tax deductible donation which you can write off on your taxes next year.
Another way to get a tax refund is to check to see if you have an unclaimed refund from a previous tax year. Contact the IRS for more information at irs.gov.
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