The average tax refund this year is approximately $3,000 and many Americans don’t typically enjoy such a financial windfall.
That leads to interesting and sometimes difficult financial decisions. Some will run out and purchase entertainment items such as big screen televisions while others will make plans to enjoy an exotic vacation!
You have choices to spend or invest the financial windfall from your tax returns.
Here are a few options:
Pay off debt
Obviously, high interest credit card debt can be damaging to a portfolio. If you can put a $3,000 dent into your debt then that would be a wise choice.
Go on vacation
I would prefer to see you budget that vacation into your monthly budget that depend on Uncle Sam to send you sailing, but if it is your only way to go then I’m go ahead and book the trip. It is better to go on a tax return paid vacation than to go into debt. I’m a big believer in travel and think that people need to experience life outside of where they live…so bon voyage!
Investments are a great way to utilize your tax return. You can either fund a Roth (if eligible) IRA, Traditional IRA, or sock it away in mutual funds. I typically don’t recommend individual stocks because of the risk. Mutual funds are a great way to plan for goals that are over five years away. This could be college planning, a new car purchase, a future up grade in home ownership, or even investing into a business.
Many homeowners are “under-water” or they owe more on their home than it is worth. Thus an investment in your home can come in a couple of different varieties and before you spend money on your home you need to consider a few questions: Do you plan on living into the foreseeable future? Do you want to sell as soon as possible? Are you under-water? Depending on your answers you could fund a remodeling job, add some storage, or pay-down your mortgage to help improve your equity situation.
Almost tax time!
It is almost tax time and we don’t want you to miss out on that windfall! Make sure you stop by your local Liberty Tax office soon!
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.