If you are expecting a refund this year, you may be tempted to splurge on something not-so-practical. Before you do, take some time to think about ways to use your refund to bolster your financial health. We’ve put together a few ideas for you to consider:
- Start or increase your emergency fund: If you don’t already have at least six months of savings stashed away in case of an unforeseen financial emergency, use your tax refund to help build up your savings account.
- Eliminate or pay down high-interest debt: Paying off high-interest debt such as credit card balances, payday loans and debt consolidation loans with your refund is a smart move.
- Contribute to tax-sheltered accounts: Use your tax refund to top-up (or start) a Roth IRA or 529 college savings plan. You’ll compound dollars and interest for your future retirement or college tuition needs while scoring a tax deduction as well. While contributing to tax-sheltered accounts is a smart way to use your refund, you can also take advantage of these Tax Day deals to make the most of your money this season.
- Create a legacy: If you have always wanted to create your own foundation for giving back, use your tax deduction to get it started. You may even be able to use your new non-profit status to mitigate your tax bill for next year while doing good for others.
- Invest in yourself or your business: If you’ve taken care of savings and debts, consider enriching yourself by taking a class or purchasing a needed piece of equipment for your business.
These are just a few ways that you can fortify your financial future with your tax refund. Steven M. Ellard, CPA encourages you to make a plan for using your money wisely this year.