Menu #10: How to make the most of your tax refund

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$72k is the new all-time high for Bitcoin. The cryptocurrency has received support this year from the US financial regulator approving exchange-traded funds [ETFs] tracking its price, while an upcoming "halving" is anticipated to reduce supply and bolster the currency's price (Source: Trading View).

61% of Gen Z respondents in a recent study revealed that they would purchase a home with a friend. 13% of them were more likely to be interested in co-buying a home with a friend than with a parent. Only 1 in 4 Gen Zers are concerned about the risk of default or uneven investment. (Source: JW Surety Bonds Survey).

$3,200 is the average tax refund (as of Feb 2024), which is a 2.1% increase from the $3,140 average seen in early 2023 reports from the same period. Part of the reason that Americans are receiving bigger tax refunds on average is due to the provision changes the IRS made to counteract inflation (Source: CNBC).

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How to make the most of your tax refund

Last year, the IRS gave back over $345 billion to Americans who filed their taxes. Can you believe the average refund was almost $3,200? That's a nice chunk of change making its way back to our wallets. Now, we know the first thing that might pop into your head is splurging on the latest gadget or booking a vacation to some sunny paradise. Let’s hit the pause button on those plans and consider more fruitful ways to spend the cash.

Welcome to your financial turning point

Imagine for a moment the peace of mind that comes from being debt-free or the security of having a full savings account for those just-in-case moments. That tax refund you're about to get isn't just extra cash; it's your hard-earned money finally making its way back to you. If you use it smartly, it could be a real game-changer for your financial health. Let's dive into the possibilities!

1. Say goodbye to debt

Many of us see our tax refunds as the ultimate debt-fighting weapon. Just picture what could happen if you used that entire $3,200 to reduce your debts. The amount you'd save on interest and future payments could be mind-blowing. Tackling your student loans, car payments, or credit card debt with your refund might just save you thousands in the long run and get you out of debt faster.

2. Emergency fund to the rescue

Here's a shocking tidbit: As we’ve mentioned before, 57% of Americans would struggle with a sudden $1,000 expense. Your tax refund could turn your emergency fund from barely-there to rock-solid. Imagine sleeping easier knowing you're ready for whatever curveballs life throws at you. Aiming to save up six months’ worth of living expenses is a smart move to shield yourself from financial surprises.

3. Power up your retirement savings

Now, let's dream a bit about your retirement. Starting with your $3,200 tax refund could be like planting a seed that grows over time. By adjusting your tax withholdings, you might find an extra $266 each month in your budget. Over 30 years, this strategy could boost your retirement nest egg by more than $500,000! Talk about making your refund work for your future.

4. Home improvements

Your home is not just a place to live; it's likely one of your biggest investments. Why not use your tax refund to make some upgrades? Whether it's energy-efficient appliances that save money in the long run, a fresh coat of paint, or even a small remodeling project, improving your home can increase its value and make your living space more enjoyable. It's a win-win!

5. Plan for big life events

Got a major life event on the horizon? Maybe you're tying the knot, expecting a baby, or planning a significant anniversary celebration. Your tax refund can help fund these joyful occasions without dipping into your savings or going into debt. Planning ahead financially for these events can reduce stress and let you focus on the happiness they bring.

Your refund: A step towards a brighter financial future

That tax refund represents more than just a windfall – it's a potent tool that's ready to work for you. Whether you decide to tackle debt, beef up your emergency savings, or invest in your retirement, making wise choices now can pave the way to a secure and serene future. So, before you go on a spending spree, consider the bigger picture. Trust us, your future self will be incredibly grateful.

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Teaching taxes tomorrow — Ankur Nagpal who co-founded and sold Teachable for $250M is back with a new company called Carry. It’s a platform that helps creators and business owners build wealth and on Wednesday (tomorrow) at 1pm CT, he’s teaching attendees how to reduce your taxes & keep more of what they earn.

Side hustle & bustle — Some of our readers have shown interest in taking on a side hustle. Well, this guy has several and his goal is to use the extra money to retire by 45 years old.

Crunch the tax numbers — Enter your financial details to calculate your estimated taxes this year.