It’s tax return time. According to stats, the IRS issues about 100 million income tax refunds annually. While it may be tempting to go on a shopping spree, there are better ways to use your refund that would generate more income in the future.
According to financial coach Tonya Rapley, founder of My Fab Finance, there are three great uses for an income tax return:
1. Become debt free: Don’t let the extra cash burn a hole in your pocket. Use it to pay down your debts, which will mean better credit and fewer bills to pay. “Many of us have a debt that we want to pay off and only use our income tax to pay a portion of that. Sometimes even the best of us find ourselves with unexpected credit card debt. Take advantage of this chunk of money and pay it off for good,” explains Rapley. “Once you have paid it off, don’t use it. Or make sure you only charge things you can afford to pay off within that month.”
2. Pump up that portfolio: Use some of your refund to invest. “Several people stray away from investing because they don’t believe they have the money to make the initial investment. Consider allocating a percentage of your refund for investing,” suggests Rapley. “While you need a decent chunk of money (usually $500 minimum) to start your investment fund, you can contribute as little as $50 per month.”
3. Make a change: “Do something that will change your life,” declares Rapley. “I’m also big on enhancing the quality of our lives. This year, for instance, I am using a portion of my income tax return to take my first trip to Africa. So whether it’s that life-changing trip or attending a conference or classes that will help you increase your income, confidence or productivity, go for it.”