Tax season is here! While some of us may get a tax bill, an average of 64 percent of Americans will receive a refund.
Many people rely on their tax refund in the new year to help them feel more financially secure. It’s important to have a plan for the money to help you meet your financial goals. One way you can do this is to reflect on what might be causing you financial stress and create a list of priorities. Here are some ideas to make the most of your tax refund.
1. Consider Your Savings
Over a third of Americans say they have less in emergency savings now than they did pre-COVID. This may be a good time to replenish your savings to cope with unexpected expenses.
Many experts recommend having at least three months' worth of income set aside in case of a job loss or other serious financial issue. If you can’t hit that, having some level of savings — even $1,000 — can make a big difference in a crisis. Consider putting your money in a savings account with a higher dividend or interest rate, such as a money market account or certificate, so that you maximize your earnings.
Another savings option is to put money into your retirement accounts. Over the years, that extra contribution can earn returns and make a difference later.
Maybe you don’t quite know what to do with your refund, and that’s OK. Save for the purpose of saving. You never know when you might need those funds for something later.
2. Pay Down Debt
Do you owe money on credit cards, loans, or other debt? Paying down debt is one of the best ways to use your tax refund.
Another great option is to eliminate one of your debts altogether. You’ll avoid accruing interest and put more money in your pocket, improving your financial health!
Check out our Debt Pay Down Methods resource to get started.
3. Have Fun with Your Refund
Tax refunds aren’t just about supporting serious financial goals — they are also about setting aside some money to simply have fun. Consider your goals and see how your refund can help you achieve them. You can start a vacation savings account, check those new sneakers off your wish list, or look at upgrading something in your home.
Taking breaks and having fun is great for your mental health!
Whether you save, spend wisely, or simply have fun, tax refund season is a time to invest in your future.
