Tax season has officially begun.
January 28 was the first day taxpayers could start filing returns, both paper and electronic. Once you file, you can sit back, relax and wait for your refund to come in. But what to do with the money once you get it? Here’s what experts suggest.
1. Pay down any debt
One of the best uses for that leftover money is reducing debt.
Credit card debt is typically the more pressing debt to pay off, but that shouldn’t be the only thing to focus on, said Gage Kemsley, vice president of Oxford Wealth Advisors, in New Mexico. Consider paying off any personal loans, car loans or even putting the money to your mortgage.
Don't know where to start? Here are some ways to pay off your debt in 30 days (or less).
2. Boost your retirement savings
Have you fallen behind on contributing to your employee 401k or building your own retirement nest egg? Allocate some of your tax refund for retirement savings, suggests Andrea Woroch, consumer finance and savings expert.
Don’t have a 401k? “You can open a Roth IRA, which grants tax breaks when money is withdrawn during retirement and won't penalize you for withdrawing early either, in case you need it sooner,” said Woroch.
3. Start a DIY home project
Home improvements always seem to fall by the wayside, particularly when money is tight. A refund may be just the kick-start you need for a long overdue project, says Kemsley. But, he advises not blowing all the money on just one big remodeling expense.
“A lot of people have plans for their refund before it ever hits their bank account, so my advice for this is the same thing my grandma would tell me after giving me a $5 bill for my birthday, ‘Don't spend it all in one place,’” said Kemsley.
Make sure to check out this list of hidden remodeling expenses before you go knocking down your walls.
4. Learn a new skill
There are few better investments than you. This includes furthering your education and expanding your marketable skills for a future job.
“Brush up on your networking skills or learn the basics of social media,” said Woroch. “Continuing education is key to better job prospects and earning more money in the future.”
Woroch suggests checking out the course offerings at your local community college or online. You could also use your refund money to fund that entrepreneurial idea you’ve always had or puting it toward a side hustle.
5. Plan for a rainy day
Travel snafus, car accidents and medical emergencies are inherently unpredictable, and having some money set aside to pay for such unexpected expense can provide peace of mind.
Plus, “an emergency fund will keep you from dipping into your retirement savings or using a high interest credit card, all of which can put you into a worse financial position,” said Woroch.
6. Splurge a little
There are plenty of important ways to use the money to help accomplish long-term goals and improve your overall financial picture, but don’t forget to set aside at least a small portion of your refund to have fun.
“First and foremost, you should enjoy it. After all, it’s your money. You earned it,” says Michael Foguth, founder of Michigan-based Foguth Financial Group. “Take a small vacation or enjoy some entertainment, but make sure you still have some money from your refund leftover.”