It’s tax time. That means it’s tax refund time! After you’ve done the paperwork and know when you should expect your refund, it’s time to decide how to spend it. When that amount of money shows up at once, it’s hard to resist the urge for a weekend getaway or new toy in the driveway. But is that the best use of your refund? We have a better idea.
Here’s our list of the five best ways to spend your tax refund in 2018.
#5 – Make Home Improvements
Making home improvements can be fun, and they’re also a nice investment. For example, landscaping upgrades can increase a home’s value by ten percent! Maybe you’ve been wanting to replace those outdated faucets or light fixtures. Maybe your guest bedroom needs a new coat of paint. What about a Wifi programmable thermostat to save money and start you on your way to a connected home? Your tax refund can make all of these possible.
#4 – Establish a Rainy Day Fund
A rainy day fund is intended to help you cover three months of expenses in case of emergency. But you may need more than that in the event of an unexpected car problem or medical bill. Many of us just aren’t that good at saving. Use this time of year to change that. Add to what you have or get started altogether by using some of your tax refund for a rainy day fund. You never know when you might need it.
#3 – Donate to Charity
Another great way to use that tax refund is by donating to charity. Choose an organization that’s especially meaningful to you and makes a real difference in the world. You can use Charity Navigator to search for your charity and see exactly how the money will be used. Giving a portion of your refund away allows you to help those who need it most. It also gives you the opportunity to claim a charitable contribution deduction on next year’s tax return.
#2 – Pay Down Credit Card Debts
It’s easy to run up high balances on your credit cards. And the national average of interest on those cards? 16.8% and climbing! Who knows what you’re still paying off? Maybe it’s those new shoes from last spring. Or that vacation from two years ago. If that’s you, consider spending your tax refund to eliminate a lingering debt. Those debts can have a significant impact on your ability to borrow money. In fact, lowering your debt-to-income (DTI) ratio is one of the most important things for homebuyers to be aware of. Lower that ratio with your tax refund.
#1 – Make A Down Payment on Your New Home!
This answer might seem a little bit biased. But when you do the math, one of the best ways to put that tax refund to work is on a down payment for a new home. This is especially true for those who feel like home ownership is a distant dream. Renters in Texas should pay special attention to this one as buying has significant long-term advantages to renting. And with our down payment assistance programs, qualifying borrowers might be able to get into a new home for as little as a security deposit on a new lease!
So, take the money Uncle Sam gives back to you and invest it in a house you can call home. The benefits of owning your own home will continue to pay dividends long into the future.
Texans trust The Wood Group of Fairway for transparency and unrivaled service throughout the home buying process. Connect with a loan officer today to get started.
This article does not constitute tax advice. Please consult a tax advisor for your specific situation and important tax information.