If you’re receiving a tax refund this year, you have a big decision to make: What to do with it.
No doubt you’ve already heard about why you shouldn’t be giving the government an interest-free loan. Maybe you’ve decided to revise your withholding or estimated tax payments to reduce the amount of next year’s refund. Either way, you have options. Financial planning means creating effective strategies that work for you.
The more important consideration right now is what you do with the money you get back. Here are ideas for making the most of your refund:
• Stash it away. When the unexpected happens, it’s your job to figure out how to pay the resulting bills. Putting part of your refund in a readily accessible location such as a checking or savings account will help you weather temporary setbacks without incurring penalties or transaction fees.
• Use it wisely. Using your refund to invest for the long-term is usually a good idea. For instance, energy-efficient windows or a new water heater may result in lower electric and insurance bills. Ditto for paying down high-interest credit cards, as long as you resist the urge to reload them.
• Invest in yourself. Using your refund to refresh your career skills or to learn new ones can provide a double benefit: more employment opportunities and tax savings. If you’re unsure of your job security, put your refund to work by financing a home-based business and creating a second stream of income.
Give us a call to learn about different options for your tax refund that may provide tax breaks this year.