Invest in Yourself with Your 2022 Tax Return
Tax season has arrived. Many individuals rely on the financial relief of receiving their tax returns, especially with the increased cost of home heating, groceries, and utility expenses. Here are three ways to make your refund work for you:
Pay down debt:
Using your refund to pay off or pay down your debt can help you become financially independent. Even if you cannot pay the debt in full, reducing your debt can positively impact your credit score and increase your monthly cash flow. For example, if you are paying $200 on a credit card with a high-interest rate, paying that card off will allow you to reallocate that $200 to other expenses or savings.
Savings:
Adding to your savings accounts is a great way to invest in yourself with your refund. Consider adding or starting an emergency savings fund once you receive your return. In the case of an emergency such as job loss, medical issue, pandemic, or other unexpected life events, having an emergency fund can help relieve stress and focus on the situation at hand. A great goal to work towards is saving enough for 3-6 months’ worth of living expenses. Another great savings option for your refund is investing money by opening a high-yield savings account or Share Certificate (CD).
Sinking funds:
Sinking funds or periodic expenses occur throughout the year instead of monthly. Examples of sinking funds are home heating expenses, holidays, birthdays, yearly subscriptions, or school expenses. Setting this money aside for future annual expenses can help relieve stress and avoid financially difficult situations when it comes time to pay for them.
Consider using your refund to improve your financial situation and set yourself up for future success! If you need help allocating your tax return, contact Carrielyn, our financial education coach, by calling (207) 660-6267 or emailing creynols@newdimensionsfcu.com.