According to the IRS, over 33 million people have processed their tax returns by mid-February 2022. The average refund check is $3,500. Many people look forward to receiving this lump sum of money every year.

Receiving a tax refund may appear to be a good deal, but for most taxpayers, it is an interest-free loan to the government. But for some people, the benefits of receiving a refund check may outweigh the short-term loan. For instance, some people may not want to risk owing the government money at the end of the year. Or they may prefer to have this lump sum at one time. Personal finance is personal, so it is your choice to receive a refund. But if you want to receive more of your money throughout the year, speak with a tax accountant to develop a plan. With more income throughout the year, you can invest more over time.

But if you are one of the 33+ million Americans that will receive a refund this year, this article will discuss some practical ways to maximize it.

If you are receiving a tax refund this year, you have an opportunity to either draw closer to your financial goals or move further away from them.

It’s easy to fall back into the same spending habits as before or look at this money as bonus money.

You can subscribe to the ‘treat yo’self’ philosophy rather than the ‘achieve my financial goals’ mentality.

The question you must answer is which one are you going to choose?

I hope you will choose the latter. Below are some ideas to maximize your tax refund to accelerate your wealth.

Remember,

Your money will change when you do.

Increase Your Cash Reserves

I know everyone is excited to get back to normal since the pandemic appears to be winding down.  But due to the recent record levels of inflation, you must be vigilant and intentional with your money. Even though many restrictions are being lifted, now may not be the best time to do everything you could not do during the pandemic.

Check out: 5 Ways To Manage Your Money During Inflation

If you are receiving a tax refund, continue to build your cash reserves. Be comfortable with having money in your savings account. Be comfortable with that money being ready and available for you whenever you may need it. Note, it is not when you want it, but whenever you need it.

Choose to save your tax refund. Do not allow your money to easily slip away from your hand to someone else.

If you have already saved your 3-6 months of expenses, consider dedicating your reserves to an investment account or an opportunity fund.  At some point in the near future, the market will correct (decline) and people with cash will be able to purchase investments at a discount.  Remember the 2007-2008 Housing crash?  The winners in that environment, are those with access to cash.

Get one month ahead of your bills

Living paycheck to paycheck is stressful and prevents you from focusing on activities that can boost your income. Because you are constantly being resourceful, there is limited energy to focus on anything else.  Paying your bills a month ahead helps you climb out of the paycheck to paycheck cycle.

It provides the breathing room to address any unexpected events without getting behind on your current expenses. If you plan to use this strategy, ensure that you review your monthly expenses and set aside the amount in a separate account. Pay your monthly bills from that designated account.

This strategy is particularly good for those who earn an irregular income, meaning their wages are not the same every month. Setting aside the income in advance is a great opportunity to stabilize your budget and get a head start on your financial goals.

Pay down high-interest debt

As of March 2, 2022, the average credit card interest rate is 16% according to Creditcards.com. They state that “cardholders who carry balances are running out of time to pay off their debt before interest rates on variable-rate card accounts tied to the U.S. Prime Rate increase.” For the past two years, the Federal Reserve has kept the interest rates around zero percent, but that is about to change. Jerome Powell, the Federal Reserve chairman, testified to Congress that they will likely raise the rates this month.  A summary of the decision can be found here.

To make a long story, short. Eliminate variable, high-interest debt now.

If you are getting a tax refund, this is an opportunity to increase your future cash flow. If the interest rates go up, then you will pay more interest than principal, and take longer to pay off the debt.

Invest in Training to Develop Skills

There are not many investments that can provide a greater return on investment than an investment in your intellectual property. i.e your education. This intangible investment is a wealth multiplier if you develop high-value skills. The amount that you can earn is unlimited because there is no limit to what value you can bring to the marketplace.

We get paid for bringing value to the marketplace. It takes time,… but we get paid for the value, not the time.” – Jim Rohn

If you considered developing a skill and you delayed it because of financial reasons, this may be an opportunity to invest in the training. Research the training to make sure that it will deliver the outcome you desire and then commit to it. Your income will change when you take action to make it change, whether that be paying off debt or increasing your income.

You must decide first, then commit.

Give A Portion

I hear people say that if they had more money they would give. Others say that when they get more money they will give.

Here is your opportunity.

No one said you must give a lot. Just give something.

I know what you are thinking. How can I give, when I am still in debt or (insert another expense)?

My response is you will not reap what you will not sow. The law of sowing and reaping is a universal principle that works. Whether you choose to follow it or not, is up to you.  But the rule still applies.

While there is no dedicated amount that you must give, it is the act of giving that matters. Giving to others allows you to use your resources to be a blessing. Everybody loves to receive blessings, but why not focus on first being a blessing.

Giving has a circular effect. You may even receive more than you gave.

Conclusion

It will be easy to spend this money on things that you want and planned to buy. That is an option, but ask yourself how those items will be a return on your investment in the future. Then decide. You may not be able to do all these strategies at the same time and that is ok. You can select one, but the key is to make sure your tax refund works for you and not for someone else.

This is an opportunity. Maximize it.

That’s getting your Finances On Point.