It’s that time of year again, tax time! All of your tax documents should be in and now you can file your tax return. Federal tax refunds are processed fairly quickly, so what should you do with the money? This isn’t free money from the government, it’s money the government has been holding from you all year. It’s not wise to just spend it on anything, invest in yourself or your family.
- Emergency Savings: You should always have a three-six month emergency savings account. We suggest having a long term disability policy to kick in after 90 days so you don’t run out of emergency savings. If you don’t have the savings account this is your first priority to set up.
- Pay Off Debt: some debt can be useful, but unsecured debt is very dangerous. Rates on a credit card can exceed 20% and many rates have risen in the last year. It can be very difficult to pay off when you are paying a high-interest payment. However, if you are interested in buying a house, consult a mortgage expert on how much to pay down until you close.
- Buy a Need: Know what is a need or a want. You don’t need a new Ford Mustang, but you might need a root canal.
- Buy a House: This is our favorite one! For most Americans buying a house is a childhood dream. But, it’s not cheap, there are ways to decrease the cost, but you will still need furniture, appliances, and more.
- Donate to a Charity: There are plenty of charities out there that could use your help. It gives you a good feeling, plus it may help lower your tax bill for next year. If you are looking for good charities, we suggest our friends at Serve More.
- Invest in a Tax Shelter: That may be a funny word, but there are plenty of ways to invest in your future while lowering your taxable income for next year. An IRA is a great way to invest in your retirement or a 529 to help your kids get through college.
- Spend it! If you are all set with your savings, little debt, no needs, love your house, and give lots to charity then just spend it! There is always something that you want, go buy that Maserati.
This is just a short list of what you can do with your tax refund. There are lots of other ideas, but these are some of the best. If you are considering buying or selling a home as part of your tax refund plan, we’d love to help.