Use tax refund money smartly to improve your financial situation

Have you received a lump sum amount as tax refund? Are you thinking how you can use it? This time, you can think of spending your tax refund smartly. There are various ways you can use your tax refund check to improve your financial situation. You can make debt payments, use it to repay your mortgage or just plan a memorable vacation. Check out 7 smart ways to use your tax refund to your benefit.

1. Start another retirement savings account

Even if you already have a retirement account and deposit dollars to grow your fund, there's no harm in starting a new one. Actually, it will help you in future. So, you can put your tax refund check into a Roth IRA or a Traditional IRA. You can start an IRA account even if you have a 401(k) or a 403(b) or an employer-sponsored retirement plan. However, you'll have to meet certain income requirements to open such a retirement account if you have an existing one.

2. Invest the amount in a property

Using your tax refund dollars to invest in real estate is a great idea. If you're currently making payments on your mortgage loan, then try to pay it off as soon as you can, so that you can invest in another property. Paying off the principal amount on your mortgage loan early will also help you save a considerable money in interest. However, before proceeding with repaying the loan, check with your mortgage lender about the early payoff options along with terms and conditions. It will help you make the decision.

3. Make home improvements or refinance your loan

Instead of paying off your mortgage loan early, you can use the extra amount, you're getting from tax refund, to refinance your loan. The tax refund check can be used for paying the closing cost. And, if your loan is manageable, then you can use the money to make home improvements. Take a walk around the house - do you need to improve the kitchen or the bathroom? If yes, then make the necessary improvements and in turn, your property value will increase and your living will also be comfortable.

4. Increase your emergency savings fund

Do you have an emergency fund or an emergency savings account? If yes, then how much have you saved up till date? If you don't have one, then make it mandatory to deposit a certain amount of your paycheck, better if at least 10%, into an emergency fund account. You can start such an account with the dollars you're getting from your tax refund. And, if you have one, deposit the amount to increase your fund.

5. Pay off your high interest credit card bills

If you have outstanding debts to pay off, then it's perhaps the best idea to use the amount to get rid of it. Just calculate, if you repay your debts today, then you can save the amount which otherwise you need to pay an interest. If you cannot repay your entire outstanding amount with your tax refund check, then it is advisable to pay off your high interest debts first. It'll be beneficial for your financial situation.

6. Do an energy audit of your house

Have you ever done energy audit of your home? It may cost you about $30 to several hundred dollars; but, such an audit will help you know whether or not there are any leaks and you need insulation. If you do the necessary repair work, then in the long run, it'll help you save quite a significant amount. After the required work and following the energy saving measures, you'll be able to save on your utility expenses for years.

7. Plan a vacation early to save significant dollars

Think something different! If you have a decent emergency fund, do not need home improvements, your mortgage loan is manageable or you've already paid it off, then what can be the smart way to use your refund? You can plan to use the dollars to plan a vacation early! Planning in advance will help you get some good deals on packages. It will also help you avoid falling into credit card debt by swiping your cards for hotels, airline tickets and cruise packages.

If you have the habit of doing all these things, as discussed above, then you need to spend some amount on yourself. Think - what you've been waiting for long to purchase. Without a guilt feeling, you can go out with your family to dine at a fancy place or book a spa to pamper yourself. However, try to enjoy within the amount you have without swiping your credit cards. By doing so, you can have real enjoyment and avoid falling into debt!

Apart from the above-mentioned points, there are some other ways to use your tax refund wisely, which has been mentioned by some other writer.