The best part of tax season is getting a refund, and there are countless ways to spend that money. Before you splurge on a closet of new clothes or a vacation, consider using that cash to make smart investments that will have significant long-term benefits. Daren Katayama, CPA, LLC, a financial advisor in Kailua-Kona, HI, offers the following suggestions for the greatest impact on your returns.

A Guide to Making the Most of Your Tax Refund

1. Pay Off Debt

Using your tax refund to pay off debt will have the biggest long-term impact, as it can save you tens of thousands of dollars in interest or more. Start by putting that money toward any high-interest credit cards you may have. If you don’t have any, apply it to your student or car loans or your mortgage.

2. Put a Larger Down Payment on a Car

If you’ve been thinking about buying a new car, it’s smart to add your refund to your total down payment. This will result in a smaller loan with lower monthly payments, making it easier to pay off quicker.

3. Buy or Renovate Your Home

There are plenty of programs that allow first-time homebuyers to make a purchase with a relatively small down payment. However, that comes with a larger mortgage, additional insurance, and other costs. The more you can add to that first lump sum, the better off you’ll be. If you already own your home, consider making renovations that will increase its value.

4. Increase Your 401(k) Contributions

If you aren’t taking advantage of your company’s 401(k) matching, your refund can help you make that a reality. Increase your contributions to get the full value from your employer. Your paychecks will be a little lower as a result, but hang on to your refund to make up the difference so that you don’t feel the pinch.

5. Invest in Stocks

Investing in stocks is a smart way to grow your money. If you’ve always wanted to do so but didn’t care to dip into your savings, a tax refund is a perfect way to get started. You may want to work with a financial advisor, however, to ensure you’re making investments that align with your comfort levels when it comes to risks.

If you aren’t sure where you should invest your refund, turn to the financial advisor at Daren Katayama CPA, LLC. He will analyze your situation and determine which investment will have the biggest impact. If you haven’t filed yet, he also offers tax return preparation services. For small businesses, he provides bookkeeping and accounting services. Learn more about how he can assist by visiting his website, or call (808) 329-6635 to schedule an appointment with the financial advisor today.