A proactive approach now will save you later!
According to the Bureau of Labor Statistics Data, unemployment was at approximately 55% by the end of January 2021. Unfortunately, American households still struggle with the impact COVID-19 made on their finances and many are having a hard time making ends meet. Fortunately, tax season is upon us and we have a few ideas on how you can allocate your tax returns that may just be the extra boost you need to catch up.
Here are 4 ways to utilize your tax refund to help improve your finances:
Pay Down Debt – Use your tax refund to catch up on those past due bills! Not only will it bring your account current, but it will also lower your payments back to amounts that you can easily pay while increasing your monthly cash flow. Additionally, paying off debt can save you money on interest, and eliminating these debts will help to lower your overall monthly expenses. The money saved can be used to increase your savings, pay off additional debt, or add to your retirement contributions.
Establish Emergency Funds – With extra money coming in, now is a great time to establish your emergency funds. Having money set aside for those unexpected costs will allow you to focus on the emergency at hand, not how you are going to pay for it. Having at least $1000 plus 3-6 months of living expenses set aside can ease the stress if your income were to change suddenly.
Pay Your Annual Expenses – These are the types of bills that hit you when you least expect it. Because of the infrequent payment schedules, it’s easy to forget when they are due. Use your refund to fund some yearly expenses you may have, such as holidays, birthdays, car registration, gym dues, and annual home maintenance costs. Paying for or setting aside the money to pay for these yearly expenses will ease your mind and wallet throughout the year.
Home Improvement -Using your tax refund to improve the functionality of your home will increase the value and keep it in tip-top shape. As you know, your home is your largest investment so making sure to keep it maintained is important. Upgrading old windows or appliances; installing programmable thermostats and adding insulation and other weatherization to your home can help reduce your energy costs considerably.
If you have questions about how to best utilize your tax refund or how to make the additional income benefit you, let us know. From paying down debt to funding your emergency accounts, we have solutions. Schedule an appointment with Carrielyn Reynolds, Financial Education Coordinator, today by calling (207) 872-2771 or emailing her at Creynolds@newdimensionsfcu.com.