Getting Ahead With Your Tax Refund
By Laura Roler, Military Saves Associate, AFC ® Candidate, FINRA Military Spouse Fellow
Are you looking for an easy way to get ahead next year? Most of us would love to pay off some bills, or replenish our bank account after the last unexpected expense, but even with a strong budget, it can sometimes be difficult to find enough extra money to make us feel like we are making progress. One of the easiest ways nearly 8 in 10 taxpayers can improve their financial situation is with their tax refund.
The average tax refund is nearly $3000. While not the large lottery jackpot most of us would like to collect, $3000 is a substantial "extra" outside of our paychecks. There are always more things to buy, and $3000 can buy a lot - but then it's gone. Using it for long-term goals rather than short-term splurges is what will enable you to get ahead and secure your future.
Save for emergencies. An emergency fund provides a buffer to costly surprises such as a major car repair, a leaky roof, or travel to visit an ill family member. It preserves your ability to pay your regular budgeted expenses, and to maintain and improve your credit. Most financial experts recommend saving at least three months of essential living expenses in an emergency fund. $3000 is a great start!
Save for retirement. Divert all or part of your refund to your IRA or 401k and watch it grow. You can also purchase savings bonds with your refund, which will provide low-risk growth for up to thirty years.
Get out of debt. By paying off credit card or other debt, you may not be saving, but you are reducing the amount that you owe, and the amount on which you are charged interest. Once that bill is paid, you'll have that money to put toward your other financial goals - whether those are saving or spending.
Do you have other savings goals? How could $3000 help you save for a car or a house, your child's education , or another financial goal? If you are saving for multiple goals, let the IRS do the work of splitting and depositing your refund with Form 8888, Allocation of Refund. This allows you to direct deposit part of your refund in up to three different accounts and financial institutions. And if you need a little more incentive to save, visit SaveYourRefund to learn how saving at least $50 of your tax refund could win you $25,000.
Set a goal. Make a plan. Save automatically - with your tax refund!
- Category: Blog
- Published: 22 December 2015