You discover that you are getting a tax refund. CONGRATULATIONS! What are you going to do with it? A refund is a prime opportunity to set yourself in a better position for the future. Here are a dozen ways to make sure your money continues to work hard for you:
- Create an emergency fund: In the event of a sudden financial need, it is important to have some money stashed away. Not having savings leaves you in a bad spot in the event of a job loss, a medical emergency, major house or car repair. If you don’t have savings for any one of these life events, it could force you to resort to loans with high-interest rates or credit cards for an extended period of time.
- Put it into savings: The IRs allows you to split your refund into up to three accounts through direct deposit. Placing some of the refund in an account that is out of mind and out of sight until you really need it can really come in handy. Make sure to resist using this money for impulse buys.
- Pay off debt: Paying off any credit card balances will help to keep more money in the bank every month. Continued credit card debit yields interest rates that add up.
- Fund your retirement: Putting money away for retirement that really is not a part of your paycheck is a smart move. You can use the refund to start or add to a Roth or traditional IRA.
- Look to the future: Have any children? You can help fund their IRA and encourage them to contribute any earned income into an IRA.
- College Fund: You will be doing your kids or grandkids a big favor by placing your savings into a college fund for their education. Setting up a 529 plan can help them afford higher education in a time when rising costs are leaving people with massive debts.
- Invest in the stock market: while fluctuations make this option risky, the long-term gain could be the best option if you don’t have any immediate financial needs. Pick individual stocks or select an index fund that moves up and down along with the market.
- Kickstart your career: Take your career to the next level and invest in your professional development. Put some of your refund into courses and classes that give you a competitive edge at your place of work. By taking advantage of the Lifetime Learning credit, you may be able to use the costs of the course to take money off your taxes again next year.
- Prepay your mortgage: making extra payments on your mortgage can be a great way to save money in the long run. By reducing the principle, it can have an exponential effect over the life of the loan since so much of your payment on a long-term note goes to pay off the interest.
- Start a business: You don’t have to quit your current job to start a business. Your tax refund can seed the investment in building up inventory, designing a website or online store and turn your hobby into a money-making enterprise.
- Make home improvements: If you own an older house, putting your refund towards updates can help lower your energy bills. Replacing old windows or old appliances can reduce electric bills and use less energy. Updating a kitchen or bathroom can also make a house more attractive for when you decide to sell.
Jack McCarty is available to help with your tax problems, but can also help provide financial guidance. Let your tax refund work to benefit you. For any tax questions or tax needs, just call Jack today at 502-327-8009. Tax problems don’t just go away!