Happy Tax Day! OK, so it isn’t the most fun of days, but if you were at all stressed about doing your taxes, now they are over (unless you filed for an extension, which if you haven’t done yet DO IT RIGHT NOW.) But anyway, now most of you (83 percent in fact) can focus on getting that lovely refund in the mail. With the average refund processed by the IRS being $3,120 and about 150 million tax returns are expected to be processed for the 2015 tax year this means people are getting more than $388 billion.
Of course, it would be so sweet to take your refund the second you get it in the mail or in your account and go on a full movie montage shopping spree but alas, we live in the real world where we have to be responsible. So here are a few things you should do with your tax return that will end up benefiting you even more than a really fun shopping spree in the end.
[RELATED: 5 Things to Do Now for Next Year’s Taxes]
1. Boost Your Emergency Fund
This one is a bummer to think about, but what if you got laid off tomorrow or were in a bad accident? You need a fund of money to help you out in an emergency so you don’t go straight into panic mode. Experts recommend that you should have six months’ worth of expenses set aside in a savings account, though three would be a great start.
2. Pay Off Your Debt
With nearly 70 percent of bachelor’s degree recipients leaving school with debt, according to the White House, this means that our $1.2 trillion student loan debt may be literally stalling the economy from growing. So in other words if you are one of the many people that has student loans, use your tax refund for these. Paying more than your minimum payment goes a long way to eliminating debt more quickly. If you have credit card debt, also use your refund for that.
3. Contribute To Your Retirement Funds
OK, this is another one that doesn’t seem fun right now but will be so great when you are 75 years old. Use your tax return to start or contribute to an IRA for 2016. You will be saving for retirement and enjoying tax advantages such as not having to pay capital gains or dividend taxes annually.
4. Start a Health Savings Account
If you have great health insurance then this doesn’t apply to you, but if you are one of the many people that has a very high deductible health plan then you should consider doing this. A Health Savings Account is great because the money you put in is tax-deductible, growth is tax free and withdrawals count as tax free as well. It is a win-win-win deal.
5. Start Saving for Your Children
Do you have children or are planning on it? Open a 529 college savings plan for your children. They’ll be so happy.
6. Make a home improvement
If you own a home why not fix that appliance that has been broken or redo that bathroom. This will hopefully add equity to the value of your home over time.
7. Spend (some of) It
Hey, you worked hard. You should treat yourself with a fancy purchase or maybe a big trip and this is actually a smart investment route. Teresa Dentino, CEO and Founder of The Financial 411, says a splurge can be an important part of your investment strategy, and an incentive to keep on track with your financial goals. Just don’t think of your refund as extra money.
It is really part of your salary that you worked very hard for so be sure to use it for something that will benefit you long term.
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