Ways of Investing your Tax Refund

It is best to think about why you are investing to help you decide how your refund fits into your investment strategy.

Retirement. Currently the baby boomer generation has decided to have longer working careers, after finding out social security alone is not enough income to retire on. Invest in your future to properly set yourself up financially for retirement. Open an IRA and commit to adding to it every month through automatic checking account deduction.

Debts. Using your tax refund is a great way to assist in eliminating existing debts. Focus on paying off the debt with the highest interest rate first. This will end up costing you less money in interest over the long run. Current credit cards interest rates are between 14-15% and may be the best place to start paying off you debts.

Education. Furthering your education is a way to get the job you’ve always dreamed about and can also help increase your salary. Try taking a class this semester at a community college, with one of the many online universities or enroll in a Master’s program. People who are able to speak a second language earn on average $10,000 more per year than individuals who don’t and may be something to consider going back to school for. You could also invest in the future of your children by starting a college tuition fund for them.

Home. There are many affordable ways of investing your tax refund to increase the value of your home. Upgrades and improvements to the kitchen, bathrooms and curb appeal are great ways to maximize a return on the investment of your home. You could even higher a handyman to take care of some of the minor maintenance around the house that can prevent larger problems down the road.

Mortgage. Apply the tax refund toward paying down the principal of your mortgage. Contributing additional money to your mortgage each month will allow you to pay the loan off sooner and can save you thousands of dollars in interest over the life of the loan. Currently interest rates are at an all time low, and if you are able to qualify, consider refinancing your home. Your tax refund could be used towards paying the closing cost for refinancing, which is generally between $2000 and $3000.

A tax refund alone is not likely to change your financial future, but when invested properly can have a large impact.