You worked hard for money your money, and it’s time to let it work for you.
If you are looking for ways to best use your 2022 tax refund, keep reading. Today’s tips can help you uncover smart ways to both spend and save your tax refund.
The benefits of budgeting your tax refund
Anytime you’re facing an injection (or deficit) of cash, you can benefit from personal budgeting tools that help you make sense of your dollars and cents. Money Tracker offers a complete budgeting kit that will help you as you strive to make wise financial decisions.
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Use your tax refund for a startup business
If you’ve been planning to launch a new endeavor, your tax refund might just help. According to Microsoft, startup costs can run approximately $30,000, but that depends on your industry. A few ways you might utilize your tax return include:
- LLC formation. LLC formation is not expensive, but the attorney fees associated with it can be. Thankfully, you can save by forming yourself using a dedicated online service that walks you through your local rules and regulations.
- Business cards. Business cards and other marketing materials are investments that help your business get seen. Printed materials are tangible reminders that leave an impression. While you might not be able to find free business cards, you can find a no-cost template that allows you to customize everything from colors and fonts to ensure your card matches your brand.
Pay down debt
Debt builds over time, and compounding interest – the average credit cardholder pays more than $1000 in fees and interest each year– can make even a small starting balance a huge burden over time. If possible, pay off your highest balance first, and then pay what you would have on that on your next highest balance each month (plus what you would normally pay on this debt) and carry on until all of your debt is eliminated.
Put your tax refund to work
In an ideal world, you will already be debt free and can start saving when the IRS issues checks in April. But what’s the best way to save? If you are self-employed, this might be an IRA. However, if you would like to have access to your money on demand, a money market account might be a better short-term option. According to SavingsAccounts.com, the average national interest rate for savings accounts is just .35% APR. Money market accounts, however, may offer interest rates of 4% or higher.
Rest and relaxation
When you’re budgeting, don’t forget to set aside a bit of your tax return for taking care of yourself. A little rest and relaxation, which might be something as simple as a massage or a weekend away, will go a long way toward boosting your overall mood and helping you best manage your health. Other ideas for self-care investments include growing a garden, buying exercise equipment, or using your tax return to help pay for healthcare services you might have skipped when money was scarce.
The average tax return is expected to hover around $3140 this year, which is more than a 10% drop from last year when we had more tax credits to take advantage of. While this might not be enough to completely change your life, it is enough to plant the seeds of a successful business (through both business formation fees and marketing materials) or to get yourself out of debt. What you do with your tax return is up to you, but make sure that you budget smartly so that you get the best bang for your buck.
When you are looking to increase your financial confidence, reduce debt, and take control of your cash, you may want to consider Personal Budget Coaching to help you individualize and fine tune your budget plan. Many are now also considering accountability coaching to help them stay on track once the initial momentum slips away. Money Tracker has you covered with all the tips, tricks, tools and coaching you need.
Gave Perkins created LittleMoneyBigHouse.com to share tips and advice based on what he has learned through the years like tools for project planning, and hopefully, a little inspiration to keep people going when they hit a challenge.
Looking for a Personal Budget Coach? Get a FREE 30 Minute Consultation.