YAY! You are getting money back on your taxes, that’s great! Now you need to figure out what to do with it. There are financially responsible ways to spend it, and there are ways to blow it. I’d like to cover some of the best ways to utilize this money. When we “googled” what to do with tax returns we found multiple topics. So we listed the topics here and then Kari Apel herself, went a little deeper into the meaning.
- Start or Increase Your Emergency Fund…A good rule of thumb is to have 3-6 months of expenses in a savings account just in case, but for starters let’s get yours to $1,000. This is not a “rainy day fund” we are talking “the roof is leaking, the furnace just broke or the car needs a new transmission” fund. Those are emergencies. A weekend trip to Vegas is NOT an emergency! You can keep your savings a couple of different ways. #1 – open up a basic savings account. This is easy and free and allows easy access to funds. #2 – open up a Money Market account. Normally these accounts require a minimum amount to open, however they also have a little higher interest rate, it’s not much but free money is always nice and it also allows your money to be easily accessed in the case of an emergency. #3 – another possibility is to do a Roth IRA – ask us why and how to do it! – the only issue with this, is it may take a little more time to get your funds out, but the interest rate is MUCH higher than the Money market.
- Pay Off Debt…. *let us know if you are unsure which debt should be paid down first. Paying off Debt is ALWAYS a great idea. Once you have a minimum of $1,000 in savings let’s start tackling that debt. But don’t just throw your money at anything. There is a way to pay off debt that will keep you motivated and keep the ball rolling. Let us help you.
If you have an emergency fund and your debt is paid off (including Cars) then let’s talk about other ideas:
- Spend It On Something You Need….*NEEDS people! Does your car need a little TLC that you’ve been waiting on? Now’s the time.
- Start Itemized Savings Accounts….Breakout into several accounts that you might be saving for, new furnace, vacation, real estate taxes, etc. Same as debt we can help you decide the best way to save for these items to make them happen faster for you.
- Refinance Your Mortgage or Make Home Improvements. …If you are on a variable mortgage you may want to refinance, interest rates will be going up in 2018. *Sometimes making home improvements now will save even greater costs down the road.
- Invest In a Tax-Sheltered Account….Increase your 401k contributions or Traditional IRA contributions.
- Invest In a Taxable Account….Mutual Funds for example.
- Donate to Charitable Causes….Remember this is always still a good thing to do even though many of us may not see a tax deduction for it. Please ask us how to get the deduction!
If you have questions on how to do any of the above we can help! We have staff here who have paid of tens off thousands in debt, have a fully funded emergency fund and are saving for retirement. We can help because we have done these things ourselves.