3 Ways to Use Your Tax Refund
Tax season can be something to look forward to if you’re anticipating a refund. A lump sum of money presents an excellent opportunity to improve your financial well-being. Before going on a shopping spree, consider the following ways you could use your refund as a launching pad to reach your financial goals quickly:
1. Fund an emergency account. Unexpected expenses always arise. An emergency fund can save you from having to rely on credit cards or opening additional lines of credit to cover the costs. Instead of having to save up an adequate amount over time, consider using your tax refund to fund it all at once. Not only will you have peace of mind, but now that you’re covered, you’ll be able to splurge on something for yourself in the future, worry-free.
2. Eliminate high-interest debt. High-interest debt, like credit cards, compounds costly interest month after month. A lump-sum payment, like your tax refund, could significantly reduce your debt, and the interest accrued monthly. It’s the best way to get an immediate return on your investment.
3. Contribute to a retirement account. If you’re looking for more investment opportunities for your future, consider using your tax refund to open a retirement account such as a Roth IRA. It’s a tax-advantaged retirement savings account that allows you to withdraw your savings tax-free. If you’re unsure about placing your money in an investment vehicle that is subject to the ups and downs of the market, you can open a certificate of deposit. You’ll have a locked-in rate for a determined amount of time where your money can grow.