Last year the average refund was just over $3000.
And you might already be asking yourself “How should I spend this money?”
There are so many ways to spend it, some are better than others.
The 3 don’ts
1. Buy lots of frivolous things-
Going out to eat a lot, buying new TV’s, or game systems might feel great in the moment but in the end the money will fly out of your wallet and you might feel left with nothing, especially if your old TV or game system is working just fine.
2. Buy a new car-
Buying a new car is not bad if you need it, but if you don’t need one than you are just adding to your debt to income ratio.
3. Throwing a party-
Don’t let the heat of the moment affect your future. Paying for food and drinks for a party might feel good in the moment but it won’t benefit your future much.
The 3 do’s
1. Pay down debts-
Putting your tax return to your highest interest loan can make it easier and faster to pay off other loans. Paying off a car, or paying down a home loan are a few ideas of debts we would all love to get rid of.
2. Start a side business-
Put your money into things that could start a side business. Not only will you be able to deduct that money from next year, but you will also start a foundation for another income stream.
3. Invest in your home-
Using your tax return to improve your home is a win win, you get a better living space and your home value goes up. Maybe you could replace your counter tops of flooring. The best home improvements are the ones that are tax deductible. Solar is tax deductible. In Arizona the state refund is $1000, and the federal refund is 30% of the system cost. So you could knock out your power bill and get paid to do it.
The real question is will you SPEND your refund or INVEST it?