Isn’t it great to know that your tax liability is less than the tax paid? This is when you get a tax refund. We all wish to get a refund on our income tax and that is why we always search for income tax refund enquiry after filing our taxes. However, after getting the refund, we all face the challenge of spending the money the right way.
Here are 15 different ways to use your income tax refund smartly:
→ Invest in your emergency fund
We all know emergencies come uninvited. At such times, it would be difficult to cover your expenses without enough funds. Which is why it is important to have an emergency fund. You can use the tax refund to create your emergency fund for rainy days.
→ Invest for your career
Since the recession, most people are facing challenges in looking for a job as their skills are becoming obsolete. You can also utilise your income tax refund for your career. It could be further education, professional certificate programs or industry networking. This will not only help in your career aspects but also improve your morale.
→ Save it for retirement
We are always taught to start saving early. Although you might be transferring a part of your salary as savings, you can use your tax refund in your retirement savings. You will thank yourself for the later stage of your life.
→ Invest in Mutual Funds/Stock Market
Invest your tax refund in mutual funds or stock market if you have the proper knowledge about stocks. This will not only maximise your savings but put your tax refund to good use. This will help you earn more from your savings.
→ Buy a Health Insurance
Nobody is sure of what is going to happen next. Although we all believe in YOLO or YODO, it is always better to plan your future. A health insurance provides coverage for uninvited medical emergencies. In order to ease your financial burden, you can use your income tax refund to buy a good health insurance.
→ Pay off your existing debt
One of the best ways to use your tax refund is to use the money to pay off your existing debt. If you have an on-going loan or credit card debt, you can partially or fully pay the debt and ease your burden. You can reduce the principal amount and save thousands in your interest cost. Please make sure you close your loan the right way and don’t incur too much fee on prepayment/part-payment.
→ Make home improvements
Someone rightly said, as we evolve, our homes should too. If you had any plans for remodelling or renovating your home, this is the best place to use your tax refund. There’s always something that needs to be repaired in your house. Since your house is the most valuable asset, you can spend the same to save more in the long run.
→ Donate to charity
You can also pay the money forward by supporting an NGO or donate supplies to the needed. This will also help in tax savings for the next financial year especially if you donate in certain state-owned support organisations. As famously quoted by Winston Churchill, “You make a life by what you give”.
→ Spend it for yourself
Once you grow up, the expenses such as bills, rent and groceries just go up. Amidst this, you tend to forget yourself. This is where you need to spend on yourself. Be it a treat in the form of a spa or learning a new home-based skill such as cooking. This not only improves your quality of life but helps in mental growth too.
→ Save for your next big purchase
Plan ahead and save for the next big purchase you will be making in the near future. For instance, the income tax refund can be used as a down payment for your car purchase or a part of your savings for your next big investment.
→ Use it for buying appliances
If you were anyway planning to change your old appliances such as a fridge or washing machine this Diwali, you can now plan the same using the tax refund. In fact, this could also efficiently save energy and eventually save on your utility bills.
→ Invest in new skills
We all want to do something new that helps us grow as an individual. Well, now is the time to invest in a new skill. Be it knowledge-based skills or professional skills, you no longer have to worry about the expenses.
→ Seed the school/college fees of your kids
You can also save the tax refund to fund your kids’ or grandchild’s education in the future. Start by opening a term deposit where you put this money and use it when required.
→ Spend on experiences
When was the last time you exclusively thought of taking a break and spend time with your family? If the answer is more than 6 months, then it is time to plan a vacation. Even though it is often said to be responsible for your money, there is no harm in taking a portion of it to do something enjoyable.
→ Use it for the upcoming bills
You can also use your income tax refund to make advance payments against your utility bills such as electricity, water and more. In fact, making advance payments can also help you earn interest on the advances.
It is advisable to use the tax refund wisely and not splurge the amount in something unnecessary. Always make sure the money works for you and your family and can be an aid in your future.
