What Should You Do with Your Tax Refund?
So you already filed your 2017 taxes and you’re getting a refund. Congratulations! The average, according to the IRS, is more than $3,000, which is a mini-windfall of sorts.
Maybe you’ve been eyeing a fancy item or treating your significant other to a night out and you’ll finally have the funds to do so. That’s great, but here’s a reminder that there are other, more “responsible” things you could do with that money. Find what works best for you, and use that money wisely.
Save It
Almost 60% of Americans surveyed by GoBankingRates had less than $1,000 in their savings accounts in 2017. That’s not great! You’ve heard this before: building up your cash cushion is one of the most financially responsible things you can do, and you should have three to six months’ worth of expenses socked away. Save your tax return this year and you’re a lot closer to that.
Invest It
Maybe you want to take advantage of the record gains in the stock market. That’s a pretty good idea, and you have more options than ever to invest in a way that works for you.
Pay Off Debt
Pay off your highest-interest debt first, like your credit card. The fastest way of ending your debt drama and getting out of debt is to devote your resources to paying down the bill with the highest interest rate while paying the required minimum on the rest.
Easier said than done, of course, and if you have big bills, it can feel demoralizing, particular if your return doesn’t cover an entire balance. Here’s an alternative: Pay off the lowest balance in full, regardless of interest rate, and then the second lowest balance, etc. Known as the Snowball method, this is effective because it can seem more manageable and gives people a sense of progress. You’ll know which method works best for you.
Donate Part (Or All) of It
There are approximately 1 million causes that need your help right now, in as many categories as you can imagine. Use your mini-windfall to donate to a cause you believe in.
Spend It on Something Fun
All that said, it’s your money. If you want to buy a new coat or video game or a Bitcoin mystery box, who am I to stop you (I’ll try, but that’s a longer conversation). You deserve to have a little fun now and then. Just don’t spend it all in one place. Or do. Again, it’s your money.
I doubt you’ll have any questions about what to do with your refund, if you’re fortunate to receive one, but my Tax Problem Solver Team and I are always here to help. So please don’t hesitate to call 813-600-5889 or email me at larry@taxproblemsolver.com
About the Author Larry Heinkel J.D. LL.M
Larry Heinkel is a tax and bankruptcy attorney with more than 38 years experience helping businesses and individuals, solve their state and federal tax problems. Mr. Heinkel has been extremely successful in representing his clients before IRS and DOR, and is known throughout Florida as an expert in tax problem resolution.
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