Smart Uses for Your Tax Refund

Smart Uses for Your Tax Refund

With the new year well under way, tax season is quickly approaching. According to CNBC, the average Iowan received a tax refund of $2,590 in 2017. While it can be tempting to spend the extra cash on a dream vacation or the latest technology trend, smart planning and self-control can improve your financial situation for the entire year. Here are six ideas to incorporate into your tax refund planning this year:

·       Start an Emergency Fund – According to a report from the Federal Reserve, four in ten Americans can’t afford to pay for an unexpected $400 expense. Allocating a portion of your tax refund to a savings account can ensure you’re prepared for the unexpected in 2019.

·       Pay Down Credit Cards – With the average credit card interest rate being over 16% in 2018, paying down the balance on credit cards can be one of the smartest investments for your tax refund.

·       Prepay Bills – Have monthly payments for auto insurance or rent? Pay ahead to free up extra cash for your budget each month. You could also apply your tax refund towards your mortgage principal balance. This practice repeated each tax season can greatly reduce the time it takes to pay off your mortgage. Ask your mortgage loan officer for more information.

·       Invest in an IRA – If you have not started saving for retirement, now is the time to start. You will thank yourself for making this investment in your future.

·       Invest in Education – Maybe you have always wanted to learn a new skill. Whether it is a college course to further your career or even a cooking class to improve your quality of life, investing in education is a great use for your tax refund.

·       Perform Necessary Maintenance – Even a portion of your tax refund can make significant improvements to your home or vehicle. Investing a portion of your tax refund in vehicle maintenance can help prevent costly repairs in the future. Allocating money to home improvements can help increase the value of your home and improve your quality of life. Both options are a smart long-term investment.

While it’s not wrong to treat yourself with a small portion of your tax refund, planning ahead and making smart decisions with your extra money can put you and your family on the road to long-term financial security.