By Sam DiSalvo
See: 6 Reasons You Won’t Get Social SecurityFind: What Income Level Is Considered Middle Class in Your State?
“In a year where more people are uncertain about how stimulus checks and the child tax credit will affect their taxes, a good chunk of the public still expect to see a sizable tax return,” Murray said. Due to these unprecedented times, however, it’s important to use your tax refund wisely.
Here’s what tax experts recommend doing with your refund.
Put It in Savings
“If the COVID-19 pandemic has taught us anything, it’s that money can become sparse at a moment’s notice. Sometimes, a tax refund could make a tremendous difference,” Lavina said. Even putting away half of your refund into savings can accrue interest and put you financially ahead of where you were before you filed.
Pay Down Debt
Taxes in 2022: Find Out Everything You Need To Know About Filing, Refunds and More
Invest
If you’re new to investing, consider a robo-advisor like Betterment, which is an app that automates your investments based on your risk tolerance. You’ll have access to resources to learn more about investment and won’t have to worry about making big mistakes that can cost you early on. Investing can also mean putting money into your 401K. Whether it’s through your job or not, the more you can put in now, the more time the money has to grow.
Try To Resist Treating Yourself
It might seem extremely appealing to take this extra cash and immediately buy something for yourself. After all, you have the money, so it’s not like you’re going into debt. However, experts caution that blowing all your money on a luxury or frivolous purchase squanders the opportunity to make your money work for you and grow into even more money. Lavina recommended if possible to use your tax refund on something that helps your future. “It’s not effective to use tax refunds to splurge on luxury items and goods. Putting the money somewhere safe that allows the funds to grow appropriately is a better long-term solution than spending the money at once.”
A nice compromise might be to take you and your family out to a nice dinner when the check comes in, but put the rest of the money into something that will serve you in the long-run, so you get the best of both worlds.
