Making the most of your Tax Return

As the uncertainty intensifies within the U.S. economy in recent months, Americans are taking a closer look at their finances. For many, a tax refund check is an annual infusion of extra cash that can be used for anything. It can finance a summer vacation, pay off debt or provide a gift to loved ones. No matter how you decide to use your refund, take some time to make an educated decision in order to maximize your refund.
 
Know your situation
Everyone is different. Some people receive a smaller refund check while others receive thousands. Knowing your situation can go a long way in determining how you should spend these funds. It is a good practice to review living expenses first, such as food and essentials. After that, here a few options to consider when deciding how to your refund:

1. Pay down debt

   1. Credit card debt is especially burdensome to the average American and with extra funds, determine which debt you can really make a dent in or pay off completely.

   2. With high-interest rates, paying down credit card debt can be more beneficial than investing in the stock market.

   3. Paying off student loans

      1. Pay off the smallest loan first.

      2. Use the Snowball Method to pay off loans strategically by starting with your smallest loan and then moving the funds from that payment to the next loan to work on paying off.

2. Start a savings account

   • Job loss and surprise medical expenses are just a couple of the many emergency instances that can occur without warning so it is good to have money set aside as a financial cushion just in case.

   • Start a savings account to save for a big purchase later in the year.

   • An FCCU, a savings account can be opened with just a $5 initial deposit or, if you already have a savings account and would like a secondary account, you can name it emergency funds, vacation savings, wedding savings or whatever is meaningful to you.  

3. Make home repairs/improvements.

   • Issues with you’re A/C, plumbing or other household headaches can be costly to repair.

   • By using your refund to make these necessary repairs, you can fix your current problem while helping your future finances from taking a huge hit.

   • Making home improvements can improve efficiency and save you money in the long run too.

   • Home improvements can add equity and increase the overall value of your home should you decide to sell it in the future.

4. Donate to charity

   • Charitable donations are both tax-deductible and fulfilling.

5. Research and support initiatives that you are passionate about.

6. Use your tax refund money to make a positive impact in the world and help others.

7. Start saving for retirement

   • It’s never too early to start preparing for retirement.

   • Consider opening a tax-advantaged IRA that you can deposit up to $6,000 into per year, even if you already have a 401k plan with your employer.

 
These are just a few ideas on how to make use of and maximize your tax refund responsibly.

After reviewing your finances, if you have any questions or would like to sit down with a financial counselor/coach to help navigate all options, First Community is here to help at no-cost to you! Schedule an appointment today by clicking here.