What Should I Do With My Tax Refund?
Posted on April 03, 2018
Topic Categories: Consumer Help
By Brian M. Bushman – Financial Advisor, Saxon Financial Services
The IRS estimates that the average tax refund these days is about $2,900. That is a large chunk of money for most people, but is getting a large refund at tax time better than getting more each month? No way!
$2,900 split over 12 months would be an additional $241 per month that could be used to pay bills or to put towards savings and given the opportunity to grow. A tax refund is a tax free loan you are giving to the government. If you still like the idea of getting money back at tax time, here are a few smart ways to use your refund.
Pay Down Credit Cards
The average interest rate on a credit card is over 15%. This means every $100 you owe costs you $15 per year! Pay down the highest interest rate loan first.
Build An Emergency Fund
Ideally 3 to 6 months worth of income should be stashed away for emergencies, but any amount is better than none.
Contribute to an IRA
IRA’s are an excellent option for saving for retirement. They give you tax advantages that taxable accounts do not. Investing the money inside the IRA would provide tax advantages on top of allowing your money more potential growth.
Make Home Improvements
Small improvements in your home can go along way to improving your daily quality of life and increasing the value of your home.
Donate to Charity
A tax refund is a great opportunity to give money to a cause that is important to you. Be sure to keep receipts for your donation. This could be a tax deduction.
Invest in Yourself
Learning a new skill relevant to your career could help advance it. Learning a new skill for your home, like cooking, could help lower you bills and improve your quality of life.
When you get your money back from “Uncle Sam,” put it to good use! Cinfed’s Financial Planning Department in partnership with Saxon Financial Services is available to assist you and your family with these topics and any other financial planning concerns you may have.