6 Things You Should Never Do With Your Tax Refund
6 Things You Should Never Do With Your Tax Refund (Do This Instead)
March 4, 2024 by Vance Cariaga GoBankingRates
There’s nothing like a tax refund to give your finances an immediate shot in the arm. Depending on the size of the refund, it could be used to wipe out your credit card debt or help you build an emergency fund. Unfortunately, many people blow their refunds on something frivolous that does nothing to strengthen their finances.
The best way to look at your tax refund is as an opportunity to grow your wealth, rather than a free pass to spend money. When you complete your tax return and find that you are due a refund, consider it a return on the hard work you put in during the previous year.
One of the smartest moves you can make is to invest the money in a high-yield savings account. This is an especially good move right now, with banks and credit unions offering their highest annual percentage yields in years.
One of the best savings options is Milli Bank. Milli is a mobile-only bank owned by FNBO whose savings account pays a 4.75% APY, as of Feb. 29, 2024. That’s more than 10 times the national average interest on a savings account.
There are no monthly service fees or minimum balance requirements with the Milli Savings account, and all deposits are insured by the FDIC.
Putting your tax refund into a savings account with a high APY means the money works for you, helping you build wealth for the future or cover emergency expenses when the need arrives.
Now that you know one of the smartest ways to use your tax refund, here are some things you should never do with it.
1. Buy a Second Car You Don’t Need
It might be tempting to put your entire refund into a down payment on a second car you’ve always wanted, but it’s a mistake, if you don’t really need one. Cars lose much of their value the moment you drive them off the lot. Putting yourself into a deeper financial hole with a monthly car payment — along with the cost of maintenance — can potentially set you back for years.
2. Splurge on a Vacation
Unless the rest of your finances are in great shape, it’s likely a mistake to blow your tax refund on a pricey vacation. Look at it this way: If you invest your refund in an asset that can grow your money, the return you get might pay for a future vacation. The best part is, you still have the principle safely tucked away.
3. Spend It At a Casino
There’s a reason casinos make so much money — the odds are firmly in their favor. Hitting the slot machines or blackjack tables might be fun (at least for a while), but they can drain your tax refund in a hurry. There are much better ways to spend your refund.
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