So You Got a Tax Refund. Now What?
By Celeste Lohrenz
Congratulations—you’ve successfully navigated your way through another tax season and there’s a refund coming your way from the IRS. The only question now is what to do with the money. Sure, summer is coming and you could probably use a quick getaway to the beach. Or maybe you’ve had your eye on a brand new laptop. But if you want to get some extra value out of your refund, why not put that money to work instead?
The average combined state and federal tax refund this year is expected to be $2,900. And while you may not know someone who will argue the merits of taking a well-deserved vacation with that money, perhaps consider a different approach—one that keeps your long-term goals in sight.
With that in mind, here are a few ways you can get more out of your tax refund:
Catch up on outstanding debt: Maybe you’re behind on student loans or you charged a little too much to your credit card last month. Before you received your tax refund you may have been wondering how you were going to play catch up, and the answer has dropped right into your lap. Paying off outstanding debt will take some stress off your shoulders and improve your credit score. You’ll reap the benefits many times over down the road.
Save up for a few years: You may not be able to use a single refund for a large expense like a down payment on a house, but saving your refunds for several years might do the trick. For investments that are just a few years away, consider options like certificates of deposit, which have high interest rates and can be tailored specifically to meet your needs.
Save for retirement: If you can make a down payment on a house after just a few years of putting aside your tax refunds, think what you could save over the course of your working life. Put your refund back to work for you via an IRA or annuities contract, setting you up for a more comfortable retirement faster.
Make a charitable contribution: For community organizations, $2,900—or even a portion of that— could go a long way toward helping those in need. If you are financially stable, consider using your refund to make a charitable contribution. In many cases, it can be written off as a tax deduction for next year!
So if you’ve got a tax refund coming your way and aren’t quite sure what to do with it, stop by The Milford Bank and speak with one of our financial experts who can help you make an informed decision.
