It’s that time of year when many of us are doing our taxes and receiving tax refunds. And much like the amount of those refunds, what we do with them certainly varies from person to person. But there’s no arguing there are ways to spend you tax refund money that are smarter than others.
Thomas W. Klash, a CPA from Hollywood, Fla., has seen the tax refunds he issues to his clients get spent in many different ways over his 45 years of tax preparation. And from this firsthand experience as a CPA, Thomas W. Klash knows the difference between wise uses of tax refunds and not-so-wise uses of that money.
To help share what he’s learned over the years as a trusted and reliable CPA, Thomas W. Klash is here to give five of the smartest ways to spend your tax refund this year.
- Use it to start a business
Have you ever wanted to start your own business but just needed a little extra cash to do so? You can use your tax refund money to start your business venture or at least contribute toward saving for it. You can basically take the money you’ve gotten back from your income and use it to create future income. Genius!
- Donate to a charity
Many of us would like to donate to charities more often but just find it hard to do when money is tight. But when you get a little extra cash from your tax refund that’s an opportunity to give back and make a donation. Not only does donating to charity provide a social benefit, it also is a contribution that you can claim as a tax deduction when doing next year’s taxes.
There are several different smart ways to invest your tax refund. You can invest it in a taxable account, meaning an account outside of your tax-sheltered account. Consider looking into mutual funds or ETFs and always lean toward conservative, diversified investments with low expenses. If you haven’t maxed out your tax-sheltered accounts yet, consider putting your tax refund money into something like your Roth IRA or college savings plan.
- Buy something you need
If there is something that you really need but haven’t been able to afford like a car repair or a new pair of shoes, your tax refund can help. Maybe you have dental or medical bills that you have to pay off. This is also a wise way to spend your refund. You should always consider paying off high-interest debt first.
- Start or increase emergency fund
If you have an emergency fund already set up for yourself—which is always wise to do—you can build on it by adding your tax refund money. If you haven’t set one up yet, what better time to start one than when you’ve just come across a little bit of extra cash?