6 Wise Ways to Spend Your Income Tax Refund in 2022
Over 75% of American expect to receive a refund on their taxes this year. If you’re one of them, it can be very easy to spend that refund before it even hits your bank account. The best thing you can do is to make a solid plan for utilizing your refund in the most effective way before you even get it.
Take some time and make a list of everything you’d like to (or have to) spend your refund on. Once you have your list, you can then begin to prioritize these items to see which ones make the cut and which ones may have to wait. There may be some “wants” that need to be removed from the list, but you might be able to set aside something to start a savings fund for that item. Below are six wise ways to use your refund in 2022.
1. Pay Down Debt
It wouldn’t be a list of wise ways to spend your income tax refund without mentioning paying off debt. Living with debt can be difficult and tax time can be a chance for many to pay some of it down. If you have a lot of debt, prioritize high-interest debt first, and try to bring any delinquent accounts current. If you’re facing a large amount of debt, you can always consolidate your debt into one payment and use a portion of your refund to make a large payment towards the principal. You can do this using a personal loan for debt consolidation. Even if you aren’t able to pay off your debt completely, consolidating it can sometimes bring just as much relief and make paying it off much more manageable.
2. Prepare for Student Loan Payments to Start Back Up
For many of us student loan payments have ben on hold since the start of the pandemic, and that means that for over two years we’ve removed that item from our budget. Student loan payments are set to start again in May, so if you’re one of the many people that can expect to start paying again, it may be wise to set something aside to soften the blow. Readjusting your budget to include student loan payments BEFORE May is a must. Once you see how your budget will be affected you can decide how much you should save from your refund to help make these payments.
3. Plan for Self-Care
Many of us have a difficult time determining the difference between needs and wants when it comes to self-care. If the last few years have taught us anything, it’s the importance of taking care of oneself and being prepared for the unexpected. If you’re able to, try to set aside part of your refund to cover some self-care routines that will help you navigate through the coming year. This can be anything from doctors’ visits, mental health, a gym or health club membership, or even something like signing up for a class. Investing in the health and well-being of yourself and your family is different from going on a shopping spree or purchasing unnecessary items.
4. Pay Your Future Self
How do you do this? By investing in your retirement! This can mean increasing your contribution through an employee sponsored plan or opening an additional account to maximize your retirement planning. Opening an IRA can be one of the best decisions you can make. Investing a portion of your tax refund to pave your way to a smooth retirement is more than wise, it’s a no-brainer.
5. Invest in Your Professional Growth
An investment in yourself can often yield the highest return. Are there any certification programs or classes that you could take to help you reach your career goals? Maybe there’s a special license you’ve been wanting to obtain or a promotion you’ve been striving for. This may be your chance to add some value to yourself as an employee.
6. Create or Add to Your Emergency Fund
If you don’t have an emergency fund set up, now is the time to start one. This is one of the best things you can do to protect your financial health. Many times, people accumulate debt, such as high-interest credit card debt, because emergencies arise and they don’t have funds set aside to cover it. You can avoid this by having an emergency fund set up. You have to start somewhere, so even if it’s $100, it’s a wise investment. Make a commitment to contribute something each pay to build your fund.
If you already have an emergency fund, way to go! You’re already in a great spot by having this step completed, but your tax refund might be a way to really add something substantial to your fund.
How you decide to use your refund is ultimately up to you, and everyone’s financial situation is unique. Make sure you take the time to think about how each decision could impact your financial future.
Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1-800-692-6279 or email [email protected]. Member FDIC. Equal Housing Lender.