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While there were some alarming statistics last month about smaller tax refunds for the 2018 tax year, recent data from the Treasury Department indicates that refunds are on track to meet last year's levels, if not surpass them. So, breathe easy. If you had a good refund last year, chances are strong you're going to be fine this tax season as well. As you're preparing for a good tax refund this spring, you should start thinking about the best ways to use that money. If you plan well, your tax refund could put you into a better financial position for 2019 and beyond. Here are five great things to do with your tax refund this year.
1. Get Out of Debt
The average American household now carries over $16,000 in credit card debt from month to month. If you're one of them, one of the best things you can do with a tax refund windfall is start paying off your outstanding debts. A large refund can help you accelerate your debt repayment efforts, so you have momentum paying off high-interest credit cards and other debts in 2019. If you plan to make this the year you start working toward being debt free, you should also consider reaching out to the team at National Debt Relief. The company's debt settlement program may be a great way to address high levels of outstanding debt that you might not otherwise be able to pay off.
2. Save It for Emergencies
While it may be tempting to go out and spend your tax refund, it makes far better sense to save it for when you really need it. Your refund could serve as the start of an emergency fund, money that you set aside for sudden, unexpected events that require a significant cash infusion. If you don't have an emergency fund right now, you're not alone, as less than 40% of Americans have even $1,000 on hand for emergencies. Setting aside your refund could be a great start to a solid emergency fund. You'll breathe easier knowing that money is in the bank the next time your car breaks down unexpectedly or your HVAC system needs emergency repairs.
3. Start a Retirement Account, or Contribute to the One You Already Have
Another great way to put your tax fund to work is to help it supercharge your retirement savings. If you don't have a retirement account, you can use the refund to start one this year. If you already have an IRA, 401(k), or some other retirement savings plan, the refund would serve as a great investment. Additionally, if you have a tax-deferred retirement savings account, committing your tax refund as a contribution this year could put you in a better position for next year's tax season. In most cases, the contributions you make to a tax-deferred retirement account right now will be deductible next year when you file your 2019 tax return.
4. Make Important Repairs You've Been Delaying
You should also consider using your tax refund to make repairs or improvements that you've been putting off due to lack of funds. If you've been delaying that new set of tires for your vehicle or hoping that yellow check engine light doesn't suddenly turn red, consider using your refund to get your car the service it needs. Similarly, if your home needs maintenance in a critical area, such as with the roof or HVAC system, using your return to make the necessary repairs would also be wise. Additionally, using your tax return to implement some preventive maintenance could be a good idea as well. For example, getting suggested repairs to your vehicle or a furnace inspection can help you avoid an emergency later on down the road.
5. Invest in Your Future
Investing is another way you could get the most from this year's tax refund. If you open up an online brokerage account, you could purchase stocks, mutual funds, or other financial instruments that could help you earn a good return on your hard-earned money. Alternatively, you could also consider investing in yourself; a good refund could provide you the seed money you need to start a business. If you already have a business, investing in it to enhance your infrastructure, human resources, or marketing efforts is yet another way to use this money to improve your financial situation.
Plan to Use Your Refund Wisely This Year
Tax season is now fully underway, so ensure you get all your paperwork together and head to your accountant or tax professional as soon as you can. If you're one of the millions of Americans expecting a refund this year, consider the tips discussed here to put your refund to good use. Your 2018 tax refund can help you set the stage for a great 2019 and put you on sound financial footing well into the future.