Are you receiving a tax refund this year? If so, we have 5 ideas that can positively impact your financial future!
Usually, people have good intentions, like saving it for a rainy day or paying down debt; however, many people spend it on things they’d like to have, or they simply leave it in their checking account and it slowly disappears on unnecessary items. This year, we encourage you to make your refund work for you!
Here are 5 ideas that can help you get the most of your tax return:
- Catch up on overdue bills: The very first thing to do is catch up on overdue bills! You will lessen the risk of further damaging your credit or facing a lien on your property for not paying house taxes, water or sewer bills. Start by making a list of your overdue bills and tackle them one by one (Crossing them off a list feels good, too). Additionally, be sure to pay all insurance policies so they are current. You never know when you may need to rely on that protection!
- Add to your emergency savings account: Many people rely on high-interest credit cards or loans if an emergency expense occurs. Depositing most, if not all, of your tax return to your emergency savings account will help the next time your car breaks down or another unexpected bill arises. It will give you peace of mind to have the cash on hand to pay for it.
- Pay down high-interest debt: Do you have balances on credit cards that carry high-interest rates? Save yourself some money by
- paying off the balances completely or at least take a set amount of your tax refund and pay down the amount owed. This could save you THOUSANDS of dollars in interest!
- Open a Roth IRA*: Even if you are contributing to your company’s 401K plan, opening a Roth IRA is a wise use of a tax refund. Roth contributions (but not earnings) can be withdrawn penalty and tax-free at any time, even before age 59½. If you are under 59½, you can withdraw up to $10,000 of Roth earnings penalty-free to pay for qualified first-time home-buyer expenses, provided at least five tax years have passed since your initial contribution. New Dimensions Federal Credit Union offers Roth IRAs! Check out our rates here! *Please note: contributions may be limited by tax filing status and income level.
- Make an investment in your home: Tax refunds can be used to increase the heating or cooling efficiency in your home. Making small energy efficient improvements could help cut down on your oil bill next year! If you are looking to increase your home’s market value, consider asking a local realtor for suggestions on improvements that would raise the value of your home that will make a difference when you’re ready to sell. Most realtors will charge a small fee for this service, but it will give you a better idea of how to get the most return on your investment!
If you need assistance with making the most out of your tax refund, call Tanya Verzoni, Director of Financial Education at (207)872-2771 or email at email@example.com.