Taxes are due Tuesday, April 17th this year, and if you’ve received or expect to receive a nice refund from your taxes, you may be wondering what to do with your tax refund check. It may be tempting to splurge it on a big box item, but you may want to hold on to your money instead.
In fact, it can be a lot more beneficial to:
1. Start an emergency fund.
Do you have an emergency fund? Millions are without one, and if something such as a job loss, debilitating medical condition, natural disaster, or car accident impacted your life, financially you would be at a major loss and potentially struggling to get by.
An emergency fund is money you put away in the event something unfortunate happens, and is there to help you and your family get back on your feet during a hardship. An emergency fund should have enough money to cover expenses such as monthly bills, food, and other necessities for a period of time. Think of it as a savings account you never touch, and slowly add money to overtime. If you’re wondering what to do with your tax refund this year, contributing it to an emergency fund is a great way to help you prepare for unplanned events.
2. Get rid of debt.
Unfortunately, many Americans have debt, and whether it’s due to car loans, medical expenses, or credit card bills, carrying the burden of debt every month can be taxing on you and your family. Putting your tax refund towards all or some of this debt can help ease some of this stress and help you get on the road to financial freedom.
3. Invest in your child’s future.
The cost of higher education is rising, and even with scholarships and financial aid, many students still are unable to fund their education. You can help support your child’s future by using your tax refund to enroll in a 529 plan. This is a type of savings plan that grows overtime and is available for students to withdraw from to help them cover the costs of tuition, books, fees, and other education expenses.
4. Protect your family.
If you’re still unsure about what to do with your tax refund money, use it to protect your family. If don’t have a life insurance policy in place for your family, now is a perfect time to use your tax refund for good. If something were to happen to you right now, your family would be responsible for the costs of a funeral on top of everyday household expenses. Life insurance ensures your family is protected even when you aren’t there.
Our licensed insurance agents can help guide you and help you understand your choices when it comes to life insurance for you and your family.
5. Add to your retirement.
Even if you’re enrolled in a traditional 401K plan through your current employer and are wondering what to do with your tax refund, it doesn’t hurt to invest a bit more into it. In fact, you can actually purchase your own IRA plan or simply open up a bank savings account that is strictly for retirement. No matter how you choose to invest in your retirement, using the money you get back from your tax refund can help you greatly in the future.
6. Make your money grow.
Besides a retirement fund, you can put your money into other types of investments. By putting the money you’ve received aside, you won’t have to worry about what do do with your tax refund, instead you can watch it grow and increase in value.
Even just investing a small amount now will grow into something much bigger later on.
Moreover, whether you save it in a mutual fund or put it into a stock share, you’re helping to fund your future – just make sure to do your research and work with the right people before you make any brash investments.
7. Put it towards your home.
Owning a home can be expensive, and your energy bills may be even more expensive if you live in house that is older or not energy efficient. Therefore, if there are any home improvement projects you’ve been delaying, and you’re wondering what to do with your tax refund, it can help you to invest in a more efficient and safer home.
Old windows or warped structures can be drafty causing your heating or cooling bills to rise, while old appliances may use more energy than needed and turn into a potential fire hazard. If you’ve received a decent amount back this year from your taxes, you could put it into a project you’ve been meaning to start years ago. It’s the perfect time to start and helps to make your home a more perfect place to live!
8. Save it with a goal in mind.
Of course, the best thing you can do with any type of extra money is to save it, but it’s even better for you to save it with a goal in mind. Start something like a money jar in your home for everyone to contribute to. You can control how long you’d like the family to save, and what the end goal for the savings would be.
Maybe that goal is to save enough money for a trip to DisneyLand or plane tickets to a vacation getaway.
No matter what you choose to save for, you’ll reap the rewards of achieving your goal because you’ll have extra money put aside to actually do what you’d like, and your kids will learn a valuable lesson about financial responsibility.
Before you make and impulsive purchase, use your refund money wisely. Expand your investments or pay off some old loans, however you choose to spend (or save) it this year, make it count! How do you plan to spend your tax refund money this year? We’d love to hear about it in the comments below.