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Making the Most Out of Your Tax Return


For those getting a tax return, tax season is a pretty nice time. Getting money back that can help further your life and cover expenses can feel like a gift. Especially if you get a large return, it’s tempting to splurge a bit, but fight the temptation and instead use the money in the best way possible.

Pay Off Debts

black woman paying billsDebts are a weight on your shoulders steadily holding you down. The sooner you can get rid of it, the better. Putting your full tax return to pay off your debt might not be fun or exciting, but it does mean getting rid of it sooner and paying less interest. 

If you have student loans, credit card debt, or an auto loan, putting your tax return towards paying off that debt can make a huge difference. When making a payment on a loan, any extra money you pay over the amount due is put to pay off the principle of the loan, meaning less interest you’ll have to pay in the long run. 

Build Up Your Savings

woman with a fan of moneyIt’s recommended to have three to six months of living expenses saved up in case of an emergency or job loss. If you don’t have that already set up, put your tax return into your savings account. 

Having this money available at a moment’s notice is very important. You don’t know when disaster is going to strike, so you need to be prepared. Having a strong savings is a smart move.

If you are worried about dipping into this savings, or want to keep it separate from short term savings, open up a Pioneer Special Purpose Savings Account. This still earns you interest each month, but can keep the cash apart and easy to keep an eye on.

Repairs You’ve Been Putting Off

If you have a good amount of savings and no debts weighing you down, put the money towards making repairs. Does your car have an oil leak? Is your water heater struggling to get hot? When you run the dishwasher, does everything get clean? 

Using your tax return to fix things up will help make them last longer. By fixing your car’s oil leak now, you help it work better and possibly prevent larger issues down the road. If you have several smaller repairs, you could even knock all of them out with your tax return.

First, keep the essentials in good shape before moving on to repairing non-essentials. Your home, car, laptop for work, are items you should fix up first. After you ensure those are in tip-top shape, start fixing up the less important items. 

Invest in Something Useful

old man laying on couch while child vacuums a rugIf you are itching to spend your tax return, at least buy something useful for your life. This can be a wide net to cast, but don’t just blow your return on things that won’t make an impact for you.

Is there something that would make your life easier? Have you always wanted a robot vacuum cleaner or want to replace your old washer and dryer? These are good investments. Have you been needing to take a vacation to recharge? Take care of your mental health and use your return traveling. 

You are the person who determines what is useful, but you also have to be honest with yourself about it. Make mature purchases and try to improve your life in meaningful ways.

Put the Money to Work

If you don’t have a need for your tax return and you are content with your current situation, put that money to work by growing your wealth. Investing your tax return can help you increase your overall income, bring in passive income, and lead to a better future.

The first, and probably most important, investment to grow is your retirement fund. Do you currently have an IRA or 401(k)? Are you on track to retire with a healthy amount? An infusion from your tax return can go a long way to getting you back on track.

You could also invest in the stock market if you feel comfortable with a bit more risk. This extra cash from your tax return can be spent trying to increase quickly or at a slower more steady rate. Pioneer members have access to Investment Services that can assist with this process.

Finally, you can squirrel the money away to earn interest for a set period of time. Term Certificates with Pioneer let you earn interest on money you probably won’t spend anytime soon at a higher rate than traditional savings accounts. If you are keeping the money for the future and aren’t going to touch it for a while, why not open a term certificate and earn even more on it?

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