Tax Day is upon us! Hopefully that means you’ve already filed your taxes way ahead of time and have received a big fat check with your name on it. If not, you are among the many Americans who are dealing with the stress and headaches of tax season and filing last minute.
If you are expecting a refund though, the question remains, what will you do with it? We’ve put together a few tips to help you make the most of your income tax refund money.
- Make a Plan – It’s amazing how quickly an extra thousand or two can disappear if you have not created a plan for the money. If you have not considered where it would be best used – you are more likely to make impulse purchases with your inflated bank balance.
- Debt Reduction – Unless you have no debt, you could apply the majority of what you get back towards your debt – especially high interest debt common with revolving credit accounts. Paying down balances with higher interest rates will reduce the interest you pay over the life of the account.
- Adjusting Your Withholdings – If you received a large refund, you may be allowing the government to take too much of your money throughout the year. Maybe you just like getting a big check each year. However, paying more on high interest debt throughout the year may be the better option instead of overpaying the government. Consider all your options. A big refund basically means you’ve been giving the government an interest-free loan all year.
- Savings – If you have already paid off your high interest debt, consider an emergency savings fund, a vacation fund, or savings account dedicated to your home improvement dreams. A mortgage is generally not considered high interest debt. If you have a high interest rate on your home mortgage – refinance as soon as possible to take advantage of low fixed mortgage rates.
- Consider Homeownership – If you have not made the leap to homeownership, a tax refund may serve as a down payment, help you reduce your debt and improve your credit situation, or enable you to purchase necessities for your new home. Contact us today to get a free, no obligation, pre-approval to discuss your finances and determine how much you can afford.