Education

How to Save your Tax Refund in 2022

Posted on: Tuesday February 8, 2022

It’s tax season! For some, not all, this could mean a refund. A tax refund: is money that an individual has overpaid to the government each pay period. Some other reasons people may receive a refund include earned income credit, child/dependent care credits, and other situational tax credits. However, you may be among those who have calculated a bit more closely to what you would owe by year-end, therefore enjoying the cash during the year—when you need it most.

If you are due a refund, here are four ways to help achieve your financial goals.

  1. Eliminate debt: Use your refund to pay off high-interest debt. The payments allocated for those monthly bills can now go into savings. Building your savings is a critical step in securing your financial future.
  2. Emergency Fund: We recommend setting aside a minimum of $1,000 for emergencies. Similarly, saving up 3-6 months of living expenses will secure you and your family for that amount of time should there be an income decrease or loss of a job. If the last couple of years has taught us anything, having this type of account setup is more of a reality now than ever before.
  3. Retirement: Setting aside money for retirement is necessary to maintain your lifestyle in your retirement years. Please seek advice from a licensed professional to obtain your best options.
  4. Sinking Funds: Many people have unplanned expenses that unexpectedly arise from time to time. Examples include property taxes, holidays, birthdays, heating costs, car registrations, home maintenance, and more. One of the best ways to avoid the stress of these unexpected occurrences is to include them in your budget. We recommend saving your tax refund for these expenses, but if not, we suggest adding a budget line for your sinking fund and regularly adding money into this account.

Are you looking to make your tax return work for you? Contact me at (207) 660-6267 or email me at creynolds@newdimensionsfcu.com to set up an appointment. Together, we can set you up for financial success.