What would you do with an extra $2,900? This was the average tax refund amount in 2012, according to the IRS. If you’re getting a refund this year, here are some options that may be smart moves for you and your finances.
Start or add to your emergency fund. Choosing to save your tax refund is always wise. Consider opening a CD or money market account that may have higher rates than a regular savings account. A savings vehicle is an ideal place to park your refund if you decide you want to use it toward something else later.
Pay down a credit card or other loan. If you have a credit card, auto loan, mortgage or other loan with an interest rate higher than a savings account rate, paying down debt is an excellent way to put your refund to good use.
Contribute to a retirement account. If you don’t already have an individual retirement account (IRA), a refund may be just the incentive you need to start one and help you build a nest egg. A traditional or Roth IRA also offers tax benefits.* If you already have an IRA or other retirement account such as a 401(k), you may want to consider investing your refund in it to help give your account a boost.
Invest in higher education. Have you been thinking about courses that could advance your current job skills or help you change careers? Using your refund to pay for classes now could reap financial or emotional rewards down the road.
Improve your home or car. Putting off needed repairs could turn into bigger problems. Using your refund to pay for home or car maintenance can be a smart and safe choice. In addition, upgrades could increase the resale value. Treat yourself. Can spending some or all of your tax refund be a smart choice? It can. If your debt is well-managed or paid off, it’s quite alright to consider some retail therapy for something special (and give the economy a boost). A long-awaited vacation could provide priceless memories, a new sofa could be a place for friends to gather, or a relaxing spa day could give you stress relief.
Need Help Deciding?
An advisor at Horizon Bank can review your finances with you and help you determine how your tax refund can be put to best use. Call 888-873-2640 to learn more or visit our website to locate an advisor near you.
* This financial institution does not give tax advice. Consult your tax advisor for information specific to your situation.