After tax season comes your refund and while it may be tempting to spend that money on the latest tech gadget or new shoes, this money can be used as a nest egg towards some of your long term financial goals.
START AN EMERGENCY FUND
It’s recommended that you have at least 6 months’ worth of living expenses saved up just in case of unemployment, unexpected medical expenses, or other emergencies. This fund should be kept in a separate savings account to help you avoid the temptation of accessing it.
OPEN A CERTIFICATE
A Certificate is a great way to start working towards your savings goals. Start small with an initial deposit and then watch your savings grow over the length of your term. The longer of term you set, the higher your interest rate will be.
PAY OFF DEBT
If you are dealing with credit card debt, student loans, or medical bills, your tax return is a great way to start paying off those. Always start with the highest interest rates debts first and then work your way down. Eliminating those high interest rates early will help save you money in the long run.
CONTRIBUTE TO RETIREMENT
If you don't have much debt and your personal accounts are looking good, consider contributing to your retirement savings.The maximum amount that you can contribute may change year to year, so click HERE for the most updated information from the IRS.
UPGRADE YOUR HOME
Your home is probably the biggest investment you will make in your lifetime and improvements can help increase the value if you ever decide to sell. If you have a home improvement project you’ve been putting off due to your finances, consider putting your tax refund towards that new bathroom or kitchen you’ve always wanted.
Studies have shown that an experience, such as a vacation or fun activity, provide more long term happiness than material items. So if you aren’t dealing with any major debts and your retirement fund and emergency savings are doing well, consider putting your refund towards something fun for you and your family to do. Just remember to keep it reasonable. A $2,000 refund doesn’t justify a $10,000 vacation.