5 Smart Ways to Use Your Tax Refund

So you got a tax refund. A nice one. Your mind is nearly exploding with what to spend it on. Trust me, I know the feeling. The loudest voice in your head has tempting suggestions: Those motorcycle mods. That designer bag. That cruise.

But you also have a nagging voice you’re trying to ignore that says you should save some of that money for things you really need.

Finance experts recommend following the 90/10 rule: Take 90 percent of your return and commit it to a responsible choice. Take what is left over and enjoy a new gadget, fancy dinner or weekend getaway.

Here are 5 responsible choices:

  1. Pay down that credit card balance.
    By doing so you reduce that pesky interest and get that much closer to paying off that piece of high-rate plastic in your wallet.
  2. Add it to Your Retirement Portfolio
    You can sock it away into an IRA—or make additional contributions to your work-based retirement plan—and reap the rewards of tax-deferred investing.
  3. Build a “rainy day” cushion.
    It’s no fun putting money toward this, but finance experts recommend you keep 3 to 6 months’ worth of expenses as an emergency fund you can easily access.
  1. Keep it “in house.”
    If you own your home, consider making an extra mortgage principal payment, which brings down the effective cost of that debt.
  2. Give it away.
    You have more willpower than I if you can do this, but it’s actually a smart financial move. Not only do you help a good cause, you ultimately reduce your tax bill.

At the end of the day, the dilemma of what to do with a good refund is probably a good one to have. Spend wisely!

Source: The 6 Smartest Ways to Spend Your Tax Refund

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