If you’re expecting a tax refund, it may be tempting to jump to an impulse purchase like a new 4K TV or the latest iPhone X. But before you do so, consider these ways to make your tax refund work for you, your future, and your financial success.
1. Create an Emergency Fund
Many people don’t have enough saved up in case of a sudden financial need. Without enough money in your savings, emergencies such as a job loss, medical emergency, or major repair can be a real financial hit. Using your tax refund to start or add to an emergency fund can leave you with extra cash so you’re prepared for anything life throws at you. Keeping $1,000 in your savings account can help get you out of many situations.
2. Fund your Retirement
Consider using your tax refund to fund your future. Use the money to create or fund a 401k or IRA. Retirement may seem too far away or too close to take seriously. However, every little bit counts. When you’re no longer working, you’ll be happy that you had the foresight to save for retirement rather than spend it on something you’d have long since forgotten about. Schedule a free appointment with Family Trust Investment Services to get started.
3. Pay off Debt
If you are carrying debt, think about using your tax refund to pay it off. Debt comes in many shapes and sizes. You could use your refund to make a big payment towards your principle on an auto or mortgage loan or to help pay off a student loan. If you are behind in your credit card payments, use your refund to pay off as much as possible and avoid high interest charges. This will help you cut your expenses down faster.
4. Start a College Fund
If you have children, grandchildren, or think you may have children in the future, you’d be doing them a huge favor by saving your tax refund in a college savings account. Student loans and student debt are hard ways to start your financial independence. Give your children the opportunity to start their lives as close to debt-free as possible. They will thank you!