Make the Most of Your Refund!

It makes sense to have a clear tax refund strategy so that you can use your refund money to advance your financial security. The average federal refund is expected to be nearly $3,000 in the coming tax season. This presents many people with a perfect opportunity to do something substantial and lasting. Below are some guidelines to help you plan to get the most from your tax refund.

You can deal with financial matters that will directly improve the health of your personal finances:

  1. Credit card debt. Pay off high-rate credit card debt especially if your credit status does not allow you to transfer to a lower interest rate credit card.

  2. Emergency fund. Put the refund toward your emergency fund. Ideally, enough funds to cover three months of must-pay living expenses. Earmarking a portion of your tax refund will give you a head start on building up your financial fortress.

  3. Address a financial anxiety. Invest in education or training for you that will increase your professional value. You are your biggest income-producing asset. Fund your participation in a work-related conference or get membership in a professional organization. These things will lead to an increase in your income and greater competitiveness in the job market.

  4. Purchase big-ticket items. Funding the necessary big-ticket items on your shopping list e.g. new car, new furniture.

Use your refund in a strictly business capacity that will inject buoyancy into your business budget. The following are some examples:

  1. Start a new business. Your tax refund could be the tipping point in getting seed money to take your business idea to the implementation stage. This investment could be the opportunity to pursue a venture that will generate increasing income for years to come. You will also qualify for some more small business tax deductions in the years ahead as well.

  2. Buy business-use equipment. You can claim a tax deduction for buying qualifying equipment for business use if your business will benefit. This includes computers, software or point-of-sale systems. The new equipment and software will help your business run more smoothly which will impact the bottom line.

  3. Boost your online presence. Between domain and web hosting fees and custom design and development, the costs of creating a business website can add up. If you have been putting off your website launch, tax refund time is the ideal time to complete it.

  4. Advertising and online marketing strategies. This could include setting up an ad campaign or purchasing email marketing or social media management tools.

  5. Build a product prototype. If you have an innovative product idea, plan to introduce a new product, you could invest your tax refund to build the new product prototype or purchase the new line of products. Your refund can cover at least a part of the expenses.

  6. Outsource time-consuming tasks. Start-ups will usually need outside help to handle essential tasks and expertise especially in the early stages or periods of rapid growth. E.gs. accounting, customer support, IT. Invest your tax refund in outsourcing the task to a qualified professional. This will save time while increasing the quality of output on administrative tasks. This includes buying efficient software.

  7. Conferences. Attend a business Conference that will bring needed exposure to a pool of peer companies, market trends, build network, and provide new opportunities to market and promote your business.

Make a charitable donation, or help others such as family or friends in need or facing financial challenges:

  1. Contributing to charity is an excellent use of capital, and provides a huge benefit to society. Although the returns on your investment may not be immediately obvious, the benefits to your community will help in a major way, and you can claim the tax deduction on gifts to registered non-profit organizations too.

  2. You may have a family member or close friend facing financial difficulties. You tax refund may just be the means for you to give assistance. For example, a heavy medical bill, housing needs or cost of living expenses that is preventing them from managing on their own. Helping out a loved one with a genuine need is always commendable.

A combination of any or all of the above

There is nothing to prevent you coming up with a plan that is a combination of some or all of the above. But like everything else, it is smart to plan how you will use your tax refund for the most benefit to you and your family. Deciding whether you want to splurge on ‘consumables’ and have immediate gratification, or spend in a way that leads to medium, or long-term financial benefits will tip the scale in the choice you ultimately make from the above suggestions. Whatever that decision may be, make your tax refund work its best for you.

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