Tax refunds are on the way and here are 4 smart ways to invest the money

Tax refunds are on the way and here are 4 smart ways to invest the money

2020 was a particularly difficult year and, therefore,  many people are eagerly awaiting their annual tax refund check to be able to spend the money sent by the IRs. Before you are tempted to spend it without giving it too much thought, here are 4 smart ways to invest the money

The money you receive from de IRS on your tax refund check is the brighter side of paying taxes. But before you rush to spend it, read our suggestions to make that money bring in more money. Check out these 4 smart ways to invest your annual refund check.

When after a whole year of paying your taxes and frowning about it, the time comes to collect the money from your tax refund, the first thing that comes to mind is all the ways we can spend the money on something we want, but there are some money moves that can be much smarter in the long run.

Here are four ways of investing your tax refund this year which you should think about:

1. Invest in assets besides the stock market

Investing in stocks and bonds may be the first investment we think of, but it is only one area where you can put your money to work. It is, of course, a smart decision for retirement and your other financial goals, but there are many other options you can look into.

Diversification is important, so your money can have numerous options for growth, so analyzing new alternatives is a good idea. Some examples of alternative investments can be real estate (crowdfunding, rental properties, rehabs, etc.), investing in commodities (silver, gold, etc), or investing in arts.

2. Make extra high-interest debt payment

Has a high-interest credit card balance been a worry for some time? Have you been struggling with old debt such as medical bills, or student loans? Your tax refund money can be used to tackle that debt at last.

Start with debts with the highest interest rates because this not only helps cut down your debt a little faster but can save you on some yearly interest. If you don't have any credit card debt, use your tax refund to reduce your car or student loan debt.

3. Increase your resale value

If you own your home and have been waiting to replace a leaky pipe or start a much-needed home improvement project, the arrival of your tax refund might be a good time to make your home more functional while increasing its resale value.

The same thing can apply to your car. If you have been postponing an expensive car repair this money can help you pay for it. These types of investments can be beneficial for your everyday life and family and can increase the resale value of your home or car as well.

4. Invest in Others

Use the money from your tax refund to invest in others, by donating, for example, to a cause you believe in. You will be helping others through those charities, but you also get a tax break on your contribution. This, of course, shouldn’t be the main reason to help others, but it is an added benefit.

You can also invest in others outside of charities,

If you have a well-established financial portfolio and are near retirement age, you may want to consider gifting excess funds, such as a large refund, every year. The IRS sets an annual limit ($15,000 per recipient, as of 2019) on the gifts individuals are able to transfer to others, including family members, without filing a gift tax return.

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