Tips for Using Your Tax Refund
Like most people, you’re probably looking forward to receiving your tax refund. There are so many different ways you can use the funds, but do you have a plan for how to use it effectively? Your first reaction may be to take a vacation or head out on a shopping spree, and there’s nothing wrong with treating yourself, but it’s important to remember your tax refund can be a great opportunity to make progress on reaching your financial goals. We’re here to provide you with the best tips on how to use your tax refund.
Make a Payment Toward Your Debt
If you have outstanding debt, you may want to consider using your tax return to make an extra payment toward paying down the balance. Making an extra payment can help save you money on interest charges and can even improve your credit score. Eliminating your debt relieves you from continuing to pay those pesky monthly payments, thus freeing up more room in your monthly budget. You may not be able to pay off your debt completely, but making an extra payment can be beneficial in the long-run.
Build Your Emergency Fund
Using your tax refund to start or increase your emergency savings fund is a great way to reach your financial goals. You want your emergency savings to have enough funds to cover you in the event of a major financial setback, such as loss of income, unexpected repair or medical bills, or other financial emergences. The standard recommendation for an emergency fund is to have between three to six months’ worth of living expenses saved up. Your tax refund is a great way to boost your emergency fund balance or even get one started if you haven’t already. If you don’t already have your emergency fund started, consider opening a certificate account to get you on the right track. Our Super Saver Certificate provides higher dividends plus one penalty-free withdrawal to be there when like throws you a curveball.
Invest in Your Future
Have you started setting aside money for retirement? If not, it’s never too late to start! Using your tax refund can be a great way to get started saving for your future. We offer a variety of IRA investment accounts designed to help you get your finances in order for retirement. Consider using a portion of your tax refund to fast track your future and start contributing to an investment account that best fits your needs.
Make Improvements to Your Home
Depending on the size of your refund, you may be able to finance the home improvement projects you’ve been dreaming of. Using your tax return to improve your home is a hybrid of spending and investing. While you’re using the money for something you enjoy, you’re also increasing the value of your home which can improve the resell value. If your tax refund alone isn’t enough to fund your entire project, we offer Home Equity options that can help you make up the difference.
Donate to Charity
Do you know of a nonprofit organization or charity that you admire or want to support? Making a donation with a portion of your tax refund is a great way to do just that! This act can give you the fulfillment of helping your community and you may even be able to record the donation as a form of tax deduction when next year’s tax season comes around.
As we said before, it’s okay to treat yourself with your tax refund as long as it’s within reason. Self-care is just as important as ensuring your bills are paid to avoid budget burnout. Plan ahead how much you want to use for yourself and stick to that budget.
The Bottom Line
It’s always a smart decision to have a plan for how you spend or save your hard-earned money and a tax refund is no exception. If you need some extra advice or guidance about what you should do with your tax refund, consider speaking with a financial advisor. It doesn’t hurt to have a second set of eyes look at your current financial picture.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.