If you are one of the many people who looks forward to receiving their tax refund, it might be tempting to think of the many ways this money could be used in the here and now. However, there are plenty of ways you could put this extra cash to better use in the long term too. Here are some ideas on how to do so:
Open up an emergency just-in-case fund
Emergencies tend to crop up at the most unexpected time. And according to Murphy’s Law, it’s often a time when you don’t have the cash to cover these unexpected expenses. Of course, if it’s unexpected healthcare costs or your vehicle needs maintenance, for example, these expenses have the potential to put a huge dent in your pocket. Using your tax refund to set up an emergency repair fund for a rainy day could turn out to be the lifesaver you need when a crisis occurs.
Put away for your child’s future education
Tertiary education can be expensive. Therefore, it’s never too early to start putting money away to fund your child’s future education, especially if they are dreaming of studying for a profession that’s going to take many years to get suitably qualified for it. One of the most popular options for an education fund is opening up a 529 plan for your child. This way you could start saving money now (that will be exempt from taxes) which means you’ll be off to a good start when it comes to paying for college tuition and other related expenses one day.
Start that side hustle you’ve always been wanting to
Perhaps, you’ve dreamed of starting a side hustle that could generate more income for you in these tough economic times. There are a number of great business ideas out there. Using your tax refund to fund a portion of these start-up costs could be the financial boost you need to finally get the ball rolling.
Once you have a great business idea and the capital available, you’ll be just about ready to start a new company. Next, you’ll need to research the market, develop a business plan, determine a business structure and register your business. With an online formation service, you can make short work of this task, and put your refund to work getting your business up and running.
Buy the bigger home you’ve been considering
Many people choose to put their tax refund toward buying a new house. While this can be a good use of the money, it’s important to keep in mind that there are other costs associated with buying a home beyond the purchase price. For example, you’ll need to budget for closing costs (which can be several thousand dollars) as well as a down payment (typically 20% of the purchase price). In addition, you’ll need to pay for a home inspection and any necessary repairs. As a result, it’s important to do your research and make sure you have a realistic budget before making an offer on a new home.
Start by taking stock of the local housing market to get an idea of what homes cost in the neighborhoods you’re considering, then use an online calculator to determine what you can afford to spend each month on a mortgage payment.
Treat yourself to something fun
If it’s been a while since you’ve treated yourself to something fun, then your tax refund could come at a most welcome (and much needed) time if you need some time out for self-care reasons. Maybe it’s an overdue vacation with your partner, tickets to the show you’ve been dreaming about for months or even an appointment with a massage therapist.
In summary, an unexpected tax refund can be a most welcome surprise, especially if money has been more tight than usual lately. However, if you want this extra cash windfall to really pay off, you could consider saving and investing it smartly so that it benefits you not just for today but for the foreseeable future too. Otherwise, use it wisely to cover emergency repairs, start a business, or even put money away for your child’s college fund.
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