It’s tax season again and if you’re one of those lucky individuals, that means a tax refund is coming your way. So what should you do with that hefty refund check? Before you blow that money away on frivolous things like fancy dinners or the latest and greatest tech toys or a must-have Louis Vuitton bag…here are 6 smart ways to use your tax refund.
Pay Off Existing Debt
Pay off any high-interest debt, which for most people is credit card debt. With compounding interest hitting you every month, the debt adds up fairly quickly. Paying off your credit card could be the best investment of your money. If you can’t pay off the whole amount, pay off what you can and look into moving the remaining debt into a balance transfer credit card with a lower interest rate.
Build An Emergency Fund
You never know when you’ll get hit with unexpected expenses (loss of employment, disability, property damage). Ideally, you should have a minimum of 3 months’ worth of income in your emergency fund. If you can’t save that much, any amount in your emergency fund is better than none. Even having a small amount like $500 in your emergency fund can help get you through a lot of emergencies.
Fund Your Retirement
It’s never too early to start thinking about retirement. The earlier you save and the more money you save when you’re young, the more time you have to build up your retirement fund. Look into retirement fund options that offer potential tax savings, such as funding a 401k through your employer or putting your money into a traditional IRA or a Roth IRA.
Put It In Savings
Put that money in savings for a future goal. Look into a college savings fund for your child. Start saving for that dream house you want. Need money for the upcoming holidays or that summer vacation you’ve been planning? The idea is to have this savings separate from your regular savings account so you are less likely to dip into it.
More information on Charter Oak’s savings offers.
Use the money towards a home improvement project that can help lower your energy bills like replacing old windows, replacing the roof, or replacing old appliances with energy-efficient models. Even smaller projects like repainting some rooms in your house can help increase your home property value and equity.
Build an investment portfolio with stocks and mutual funds to help grow your money. The stock market fluctuations can be risky but there are a lot of options available to you. Speak to an investment professional who can help diversify your portfolio across different companies to maximize your growth and minimize your risks.
More information on Charter Oak’s retirement and investment accounts.
Please note: This information is designed to offer a general understanding of common financial terms and practices and should not be considered financial advice from Charter Oak Federal Credit Union. Every individual has different financial needs and goals, which should be discussed with a financial professional.