5 Ways to Use a Tax Refund
Everyone has a preference on whether to spend or save a tax refund. Here are five different ways to use your well-deserved refund:
1. Create or Build an Emergency Savings Account
Life has a lot of unexpected moments. Creating or increasing emergency savings can be a great use of a tax refund. So how much savings is enough? Ideally anywhere from three to six months of your income can be a beneficial safety net to cover bigger financial emergencies, such as a job loss or medical bills.
2. Pay Down High-Interest Debt
Americans have an average credit card balance of $6,375, up nearly 3 percent from last year, according to Experian. While having some revolving credit is good for your credit score, you may be paying more in interest than you think. Now is a great time to review your credit score, and use your tax return to pay down any high-interest debt.
Want to get rid of those high-interest cards? Consider a balance transfer.
3. Invest for “Future You”
Your employer may provide a 401K through work, but you can also open your own individual retirement account (IRA). Most individuals can contribute up to $5,500 to a Roth IRA each year (consult your tax advisor).
“Future You” may also be considering investing for your growing family. Open an earn and learn savings account for your young ones to start building savings for college, private school, or even piano lessons!
4. Make Home Improvements
From appliance updates to roof replacements, there’s usually something on the home improvement wish list. Little adjustments can have a big impact on your monthly home costs. For example, new energy-efficient appliances can lower your utility bills or replacing the windows can seal the house tighter to stop the heat and air conditioning from escaping. Consider using your tax refund to show your home a little love!
Ready for warmer weather so you can achieve more home improvement projects? Read our Home Improvement: Summer Style post for inspiration.
5. Donate to Your Favorite Nonprofit
Giving to your non-profit of choice is not only great for supporting an important cause, you may also be able to claim your donation when filing your 2018 income taxes as long as they are a qualified nonprofit organization. Consider making this a yearly tradition as part of your tax refund distribution.
How do you plan on using your tax refund this year? Tell us in the comments below!