Finance Globe

U.S. financial and economic topics from several finance writers.
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What will you do with that Tax Refund?

What will you do with that Tax Refund?

Most people agree that it feels better to receive a tax refund than it is to owe additional money to the IRS.

If you learn that a refund is coming your way, it’s time to plan your next move. More specifically, what will you do with the money?

You have the right to spend your tax refund however you want. But even with this flexibility, there are a few ideas that are better than others.

Here are three of the best things to do with a tax refund:

1. Pay down debt. Do you have credit card debt? How about medical bills? A tax refund is a great way to take care of some or all of this debt, once and for all.

Tip: focus first on the debt with the highest interest rate.

2. Rid yourself of student loans. Your refund may not be large enough to leave all your student loans in the past, but you can definitely “chunk it down.”

Throw a few tax refunds at your student loans, along with regular payments, and you will be surprised at how quickly they disappear.

3. Save it. Unless you are 100 percent ready to spend the money, it’s often best to sit on your tax refund for the meantime. Rather than spend it, put your refund in the bank. It’s not going anywhere. At any point you can use the money to your advantage.

If you don’t know what to do with your tax refund, take a look at the past. Were you happy with the way you spent your refund last year? Would you change your approach if you could?

From paying down debt to saving the money, there are many things you can do with your tax refund. As long as you have a plan that you are comfortable with, you never have to worry about making a decision you will regret.

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Comments 1

Frank on Tuesday, 08 March 2016 09:25

I hope everybody’s answer is 1, 2, or 3. What I would not recommend is to spend it on discretionary spending. This money should not be used to “Treat yourself”. If you have debt or student loans, you should absolutely use it to pay it down. You will be very happy you did down the road.

I hope everybody’s answer is 1, 2, or 3. What I would not recommend is to spend it on discretionary spending. This money should not be used to “Treat yourself”. If you have debt or student loans, you should absolutely use it to pay it down. You will be very happy you did down the road.
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