Smart Ways to Spend Your Tax Refund
So You Got a Tax Refund?
Setting up an emergency fund
An emergency fund is your safety net. You should have at least three to six months’ worth of expenses in this fund. That will help keep you out of debt and pay for unexpected expenses.
You may have had to use this emergency fund money over the past couple years to get yourself out of a financial downfall. That is okay, but you should replenish it. Your tax refund is a great way to get that money back in that account. You may even earn interest on it. 1st Source has several options available to you.
- Earn daily interest with the EveryDay Interest Savings Account >
- A holiday savings account doesn't have to be just for the holidays! The annual disbursement is in October, and if you close before that there will be a $10 fee. Further incentive not to touch that money!
- Open a CD which has a term and usually a fixed interest rate. See our rates today!
Paying down your credit cards
If you have credit card accounts that have large balances, you can lower your interest rates on them by paying them down. These tiny pieces of plastic you carry around in your purse or wallet are likely your most expensive debt. You can use your tax refund to get those balances down and reduce your interest.
Investing for retirement
Another smart use of your tax refund is to put it towards your retirement fund. You can use it to up your 401k contribution or invest in a Roth IRA. Either way, money in these accounts can grow tax-deferred, or be withdrawn tax-free, in the case of the Roth IRA.
- 1st Source IRA Savings Accounts are a smart way to start saving for retirement!
Saving for college
It is hard to save for your child's college and save for your retirement at the same time. Your tax refund gives you the opportunity to fund a 529 account that can pay for college bills. Plus, they are federally tax-free, and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary. Moreover, it may even lead to a state income-tax deduction.
Making home improvements
Even though you probably won't be able to do a complete bathroom or kitchen remodel with your tax refund, you can use your IRS check to make smaller home improvements. Some ideas may include:
- Painting a room
- Swapping out your faucets
- Replacing your bathroom sink
- Installing a programmable thermostat
- Organizing a closet
- Sprucing up your landscape
- Investing in energy efficient appliances
These are only some ideas. There are plenty of smaller projects you can do with your tax refund to improve your home.
- Apply for a Personal Home Improvement Loan with 1st Source today!