Broker Check
7 Ideas for your Tax Refund

7 Ideas for your Tax Refund

April 05, 2022
Share |

We've got that Holiday feeling - it's TAX SEASON! Like many taxpayers if you are receiving a refund here are ways to make your money work for you this year. 

1. Pay Down a Debt

While your initial reaction might to be to run out and spend on a big ticket item another idea might be to pay down a debt. Whether it's an extra mortgage payment, student loan payment or tackling that credit card it sure can feel good to get ahead on your debts. If you're looking for a strategy on paying off your debts we often recommend the snowball method and your tax refund can help give you the boost to get that plan started.

2. Start or Add to your Emergency Savings

As we're all aware especially after the last few years, we know that life can change quickly! A basic foundation for your emergency savings is 6 months of expenses. Using your tax refund to jump start that savings can allow you to take a deep breath when creating a plan for the unknown. 

3. Invest in your Space

Small home projects can add up. Simple updates or upgrades can make a big difference in your every day life and may increase the value of your home. We're not recommending a full home renovation here. We are just suggesting it may be a good idea to review your home "to-do" list to see if you should allocate your tax refund to any of these projects on your list.

4. Start an After Tax Investment

If you're already dedicated to funding your retirement you may think - ANOTHER INVESTMENT? YES! We're big fans of tackling your financial goals with pre and post taxed funds. If you're enrolled in an employer plan or investing in an IRA, GREAT! Those funds however will be taxed at ordinary income rates when you distribute them. You also can be penalized if you withdraw them before 59 1/2. An after tax investment is treated differently for tax purposes AND in general, you can access the funds without a penalty based on your age.

6. Invest in Yourself

Have a hobby you'd like to turn into a side hustle? Desperately need a mental health day? Need a visit to the dentist and don't have dental coverage? Take a moment to do a personal inventory. What do you need that always seems slightly out of reach but shouldn't be? We're not talking about retail therapy here but something that will either help you pursue a goal or help you sleep better at night.

7. Fund your Retirement Plan

This is a great conversation to have with your tax preparer. Based on the financial information they have in front of them should you make any changes to how you are currently saving your qualified assets or assets earmarked for retirement.