The following is a guest blog post from Jim McKinley. Jim is a retired banker with almost 30 years of experience. He created Money with Jim to share his advice and other resources on a variety of financial topics. In his spare time, he spends time with his family and his dogs.
When tax season rolls around, many Americans feel the stress of gathering all the paperwork and making sure it’s correct. There are deadlines to contend with and payments to be made, and it’s easy to overlook the best part of tax season: the refund. Whether you’re expecting a large windfall or a modest amount, there are several things you can do with that money to make some improvements in your life, from paying off debt to fixing up your home. If you’re stuck for ideas on how to spend it in the best way possible, here’s a brief guide to help you get started.
Start a Business
These days, starting a business doesn’t take quite as much money as it once did; with the help of online platforms, digital marketing, and social media, running a business is easier than ever. If you have an idea for an e-commerce venture but haven’t had the funds to get started, now is the time. Put that tax refund to good use with an online store, where you can sell anything from handmade goods to vintage clothing. If you’re unsure of how to get started, check out some online guides that will help you figure out marketing, ensure growth, and utilize search engine optimization to help customers find you. You could even consider starting an Income Tax Preparation Business, either full-time or as a “side hustle” utilizing The Income Tax School’s low cost Tax Practice Management Resources.
What better way to use a tax refund than to boost a New Year’s resolution? Is it time to pull the trigger on that gym membership or the latest fitness class you’ve been wanting to try? Maybe you’re more into unwinding and a yoga studio is more your speed. If you’ve been wanting to get healthy but find it difficult due to a busy schedule, look no further than an under-desk elliptical. These machines are designed to help you get fit when you can’t find the time to get to a gym, and because they’re relatively small, you can fit one under your desk at home or at work and still get all the benefits of a bigger machine. Either way, investing in your health is always wise.
One great way to use a tax refund is to consider the future. Whether you want to invest in the stock market or just make some changes to your home for a future sale, utilizing your refund in the right way could mean more money down the road. Talk to a financial advisor about the best route for investing, or think about what kinds of changes you can make to your home to ensure a nice return on your investment. This might include pulling up carpet to lay down hardwood or laminate flooring, updating the kitchen or bathroom, or making modifications for accessibility.
Start a College Fund
College is almost always an expensive endeavor; even if your child will be eligible for financial aid or grants, the cost of housing, books and supplies, and even parking at a university can run into the thousands of dollars per semester. If you haven’t already, consider opening up a college fund for your child using your refund. There are several options these days, including the 529 plan, which comes with tax benefits. Read up on the fine print before making a decision, as there are some stipulations and rules that you’ll need to be familiar with.
Get Out of Debt
Refund money is a great opportunity to make payments to some of your high interest credit cards to help lower your overall debt.
Finding the best way to use your tax return can take some time, so don’t rush it. Think about the most beneficial way to utilize the money and, if you can’t find a good one, simply open a savings account and hold onto it. You never know when you might need extra cash for an emergency or an unforeseen issue with your home or car.