People are always afraid of filing their tax returns, regardless of the fact that they will get their money back. Why not take pleasure in getting your tax refund even if it is for the process of preparing your task alone. Well if your tax returns are coming in this year then it is advisable you have plans on what to do with it.
It does not matter if your refund is small or larger, but it is necessary to consider these five ways to use your tax return.
- Pay Down Debt
Once your tax return gets in, the first smart step to take is to make sure all credit card debt is paid off. The large interest rate on credit cards debt can cost you a lot every year, so it is necessary to clear the debt while you can. Although the tax return might not be able to pay your credit card debt completely but pay off the amount it can. It will help you save your money every month which will over time become a large amount. For instants, if $1,000 is paid off in credit card debt with your tax refund you will save hundreds of dollars on the interest rates. This is the best option to pay off your credit card debt because it will save you more money.
- Fund Your Emergency Savings
Setting up an emergency saving account is another smart way to utilized your tax return. Once you have cleared your credit card debt, then it is necessary your strength your financial status and an emergency savings accounts will help out. Expert advice that you should have at least three months of your wages in an emergency savings account but six months is much better. This account will help to take care of any financial emergency that occurs and help you avoid financial pitfalls. For example, if you lose your job or suffer health crisis this fund will help you solve the problem, and there will be no need of relying on a credit card or borrowing from lenders or banks.
- Save for Retirement
After you have created a well-funded emergency savings account, then it is necessary you prepare for retirement by opening a retirement account. This aspect of life is well ignored by most people it is very important, and research has shown that people that prepare for their retirement hardly run low of funds.
- Invest in Real Estate
You can take advantage of your tax refund by investing in real estate. If you currently own a home, you can make extra payments to pay off your mortgage early. First, make sure you won’t face prepayment penalties. If you don’t own a home yet, this is a good time to buy. Home prices are still low, interest rates are historically low, and you can get a loan that requires a down payment of only 3.5%.
- Start a College Savings Fund
Use your tax refund to start saving for college. Even if your children are very young, it is never too early to set up a college savings plan. A Section 529 plan lets you prepay for college costs. A Coverdell Education Savings Account is a tax-deferred option for saving for college.
For some people, the need to plan for a tax returns is a waste of time while some see it as a means to save more money because it makes them set money aside and not do anything with the money till the government returns the money the year after. The truth is tax returns you are utilized properly when planned for.Visit: http://www.taxreturn247.com.au