For many, tax season means a big refund check is right around the corner. While it can be tempting to run out and treat yourself, we have a few tips that can help you make the best of your refund.
- Say no to early refunds.
First things first, when it comes to filing your taxes, do not use a tax service that offers you an advanced refund. This type of service will take a huge portion of your refund check. There are several places you can file your taxes for free or very low cost.
Locally, Goodwill offers free tax filing services at several locations. Several online tax filing companies offer no or low cost e-file options that are user friendly and convenient. Don’t let someone else take a chunk of your hard-earned money. In this case, waiting a couple weeks longer for your check literally pays off.
- Pay down debt
Using your tax refund to pay on existing debt or collections is a great financial move. Credit card loans have an average 16% interest rate, which can make unpaid debts multiply quickly. If you have other loans, like car payments or student loans, you can use your refund to help reduce your overall debt and the length of time you have to pay loans. Before you make a large sum payment, however, remember to look at the terms of your loan and make sure there is no penalty for early payoffs.
- Build an emergency fund
Experts say that ideally, people should have 3-6 months of income saved, but any savings is better than none at all. Financial advisers like Dave Ramsay suggest at least a $1,000 emergency fund to have for accidents or a rainy day.
- Save for a down payment on a home
A home is one of the best investments you can make, so if homeownership is one of your goals, start saving for a down payment now. If you qualify for any down payment assistance, you can use the money on any closing costs or repairs or renovations you may need to make. If you’re not sure if you qualify for a home yet, give us a call and we’ll walk with you through the process!
- Give your home some TLC
If you already are a homeowner, a tax refund could go a long way in making some home repairs or improvements. Tax money could go a long way toward big repairs or even just little improvements that could enhance your quality of life. Replace a leaky faucet. Update lighting. Service your heat and air conditioning. You get the idea.
