It is smart to invest your tax return money. When we say invest, we do not mean to invest in your vacation plans. Though it may be tempting to see tax return as free vacation money, it might be wiser to save it, pay down debt, or invest for your future.1. Extra Mortgage Payment
Your tax return can be just what you need to either start building a nest egg or pay off your mortgage faster. Even making one extra mortgage loan payment each year can decrease your repayment time by an average of three to four years!
2. Open an IRA Account
It's never too early to start thinking about retirement. The earlier you open an IRA account and start saving for retirement, the more you will have to enjoy during your golden years. Yes, golden years—golden from all the money you saved!
3. Add to Your Savings
If you know that you have a major life event coming in the future, you need to start building your savings account now. The more you save, the less money you have to take out of loans. If you have a larger down payment, you will have a smaller monthly payment, thus, making repayment more manageable. Saving money now makes life easier later.
4. Pay Back Loans
This tax return can be used to make a sizeable dent in these past investments and make them more manageable to pay off in the future. Become one-step closer to a debt free life!
While these things might not seem as appealing as that cruise to the Bahamas or kitchen remodeling, financial security will allow you have luxury in the future and peace of mind in the present. Maybe a happy compromise for you would be to use a small portion of that money to treat yourself to a nice dinner or a small excursion to the next city over, but save most of it for your financial needs.