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Tax refunds are always a hot topic this time of year. While some Americans get nothing back when they pay their taxes, millions and millions of other people count on that yearly refund to put a little more spending dough in their pockets.
Put that extra cash to good use if you’re expecting a refund. Below are some ideas for using refunds to get richer.
1. pay off the debt
Using refunds to reduce high-interest balances reduces both your interest burden and the total amount you owe.
You can also improve your credit score by lowering your credit usage, as described in 7 Ways to Improve Your Credit Score Quickly. Better scores mean easier access to credit at better rates, which can definitely make you richer.
Think of it this way: paying a credit card that charges 18% interest is like earning 18% of the amount you settle risk-free and tax-free. It is rare to find an investment with such a return.
For more help in banishing your debt, check out 8 Surefire Ways to Get Out of Debt ASAP and consider contacting a reputable credit counselor.
2. Create an emergency fund
Living paycheck to paycheck often means you don’t have enough cash to get ahead. Use your reimbursement to build a financial cushion of savings, ideally enough to cover your living expenses for at least three months.
The advantages of doing so are:
- Invoices are always paid on time, saving late fees.
- No cash upfront required, saving fees and high interest rates.
- You can stock up on bargains at the grocery store so you always have the lowest prices.
And peace of mind? Priceless.
For tips on creating an emergency fund, see 9 Tips to Start an Emergency Fund Today.
3. Save on premiums
Many auto insurance companies offer discounts when you pay 6 or 12 months of premium in full. You can use part of the refund to do that, and put the rest in a high-yield savings account to boost your policy deductible. This is an easy way to save 10% to 20% on your premiums.
For tips on how to reduce your car insurance costs, read How to Get the Best Possible Deal on Auto Insurance.
4. Take classes
Use your tax refund to pay for classes that teach the skills you’ve always wanted to learn.
Taking classes to improve your skills can be a good way to get a raise at work. Or you can start training for a new, more profitable career.
5. Invest
529 You can start funding a college savings plan or get a tax refund and open a personal retirement account. You can save a bundle if you invest your annual payouts wisely over 10 or 20 years.
Think your payback isn’t big enough to bother investing? See How to Start Investing Under $500.
6. Buy government bonds
Interest rates continue to climb to levels not seen in years, creating opportunities for those with cash to spare. One of the ways we described in “The 10 Best Ways to Rise Rates” is to buy government bonds. These can be purchased from investment brokers or directly. TreasuryDirect.gov.
They are as safe a return as you can get and there are almost no limits on how much you can buy.With a certificate of deposit.
7. Start a business
Use your refund as seed money for your side business. you could:
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