The deadline to file your income taxes is incredibly close. If you haven’t filed your return yet, this is the time to do it. The longer that you wait to file, the more likely you are to miss the deadline and face problems like late filing penalties and compounding interest. And the longer that you wait to file, the longer you’ll have to wait to get your tax refund.
You don’t want to delay your tax refund. According to IRS reports, the average refund amount for taxpayers is $2,933 this year. That’s a significant windfall that you could put to good use!
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Maximizing Your Tax Refund: Strategies for Smart Financial Planning
To get inspired, these are some excellent ideas for what to do with your tax refund.
Build an Emergency Fund
Is your emergency fund looking a little empty? Or worse, do you not even have an emergency fund sitting in a savings account? Then, you need to solve this problem.
Living without an emergency fund is risky. You never know when an urgent, unplanned expense will show up and threaten to throw your entire budget up in the air. Without an emergency fund, you might not have enough cash to cover the expense out of pocket.
You’ll have to consider an alternative payment option, like a personal line of credit. In that case, you can go to a website like CreditFresh and confirm whether you meet all of the requirements to apply for a line of credit loan. With those requirements met, you can send in your application online and wait to learn about your approval status. An approved line of credit loan would allow you to request a withdrawal, which will then be deposited into your bank account. You could use the borrowed funds to cover your expense quickly. Afterward, you could work to repay the loan and replenish the line of credit.
With an emergency fund, you don’t have to borrow anything. You can rest assured that you’ll be able to pay off an urgent expense quickly, all without disrupting your budget for the rest of the month. You’ll still manage to pay your bills on time, pack up your fridge with groceries and fill your car up with gas without issue.
To get your emergency fund started, open up a savings account. Add your tax refund as your first major contribution. Then, look over your monthly budget to see how much you can afford to put into the fund every month. You’ll want to help it grow bit by bit until it becomes a substantial safety net.
Credit Card Repayments
Are your credit card balances getting too high for your liking? Are you getting close to reaching the limits and maxing out the cards entirely? Then your tax refund could come to the rescue. Use it to pay down those balances immediately and take that stress off your shoulders.
If you have multiple credit cards to pay down, you should be strategic with your debt repayment strategy. Prioritize the card that either has the highest credit utilization ratio or the highest interest rate to contend with. This card should get the biggest payment.
Why should you do this? Paying down your credit cards comes with a lot of benefits:
- It reduces the risk of maxing out your cards
- It gives you more available credit for emergencies
- It lowers your minimum payments
- It can potentially improve your credit score
Your emergency fund and your credit cards are in good shape. Your house? Not so much.
Use your tax refund to bankroll a home improvement that you’ve been putting off. Choose a practical home improvement that could save you money in the long run, like installing a smart thermostat, cleaning out your air ducts or repairing your water heater. Invest in your home!
Your tax refund could be a big windfall this year. So, you should follow one of these suggestions and put it to good use!