If you were lucky enough to get a refund from Uncle Sam this year, resist the temptation to spend it on a vacation or a new set of tires. Instead, consider these ways you can use your refund to start or expand your nest egg.
Pay Down Existing Debt
With the average credit card interest rate hovering in the 15-18% range, using your tax refund to pay down any balances you have on credit cards will save you big money in the long run. Don’t have credit card debt? Consider paying down your auto loans or any other loans you may have. Be sure to check if your loan has an early payment penalty before you pay it off!
Build Your Emergency Fund
You should ideally have three to six months of income stashed away as your emergency fund. However, even if you don’t have close to that much, having some money stashed away is better than having none when an emergency arises. Consider placing at least part of your refund in a savings account just in case you need it down the road.
Fund Your Individual Retirement Account
Even if your employer offers a 401(k) or other retirement savings option, consider opening an Individual Retirement Account (IRA) and placing some money toward your retirement. The money you save now will multiply many times over before you need it in retirement. Allegius can help you open your IRA too! Learn more https://www.allegius.org/accounts/personal-savings/individual-retirement-accounts-iras.html .
If you have paid off your debts and built your emergency fund and IRA, consider investing your tax refund. There are lots of options for investing, whether through a brokerage account or online. Do some research and pick the option that best suits your needs and objectives.
Consider Buying Flood Insurance or Increasing Your Liability Coverage
With less than $1,000 you can purchase flood insurance from the National Flood Insurance Program if you live in a low to medium risk area. For under $500, you can buy an umbrella liability policy with $1 million in coverage beyond the limits of your car or homeowner's insurance. Sometimes good money management means addressing the painful "what if" questions.
Start a Savings Account for Something BIG!
Want to buy a house? Go on a dream vacation? Buy a new car? Start a new savings account for just that purpose that is separate from your regular savings account. It will make it much easier to save and not dip into it for splurges along the way. Check out the Savings account at Allegius at https://www.allegius.org/accounts/personal-savings/special-savings-account.html.
Invest in Improvements to Your Home
Increasing the value of your largest asset is always a smart move. Consider repainting some rooms in your home, replacing that leaky faucet, adding a programmable thermostat, replacing your water heater or windows to make your home more energy efficient, or just cleaning out and sprucing up your garage. The money you invest will not only increase your home’s value, but will also make it a much more enjoyable place to live!
Donate to Charity
Consider using part or all of your refund to donate to the charitable organization(s) of your choice. Not only will you help a very worthy cause, you’ll also be able to write your donation off as a tax deduction next year!
Replace an Inefficient Appliance
If you're still using an old refrigerator or washer-dryer combo that's energy inefficient, consider donating your old appliances to a charitable organization and buying a replacement that's more energy efficient. You'll enjoy a new appliance, and your utility bills could be lower as a result.
Invest in Yourself
Have you always wanted to take a college course? Would additional training in a certain skill make you a more marketable employee? Consider using your tax refund to invest in yourself by enrolling in courses that interest you. In the case of enrolling in courses that help you professionally, you may be able to turn that investment into greater earnings.
No matter how you are working to reach your financial goals, Allegius is here to help! Stop by and let one of our member services team members help you choose the best services for your needs.