Long-term goals versus short-term rewards. It may sound like a buzzkill to some but financial planners like Maggi Tax get it. A tax refund is a great way to kickstart any financial goals you may have or even improve your current financial situation. Here are four ways to make a big impact when utilizing your tax refund.
- Pay down debt
It may not be the sexiest way to use a tax return, but it is definitely one of the smartest. High-interest rates and overdue balances are the leading culprits of credit card debt. Use your refund to pay off as much as possible to alleviate the debt squeeze and improve your credit score.
- Invest it
Work with a tax professional to invest a portion of your tax refund into the stock market. There are several investment options available that can be tailored to your risk or risk-averse attitude.
- Add to the emergency fund
Emergencies can happen at any time so it’s important to have access to an emergency fund. For unexpected expenses like medical bills or car repairs, this fund can help you avoid borrowing money to cover costs. If you don’t have a fund started yet, consider using a portion of the tax refund to create it. In most cases, we recommend three to six months’ worth of expenses as an emergency fund baseline.
- Retirement fun(ds)
Another idea that may not be fun but will help with your future funds. Adding a portion of your tax refund to retirement savings can significantly impact your financial goals. Consider depositing funds into your 401(k) or Individual Retirement Account (IRA) for some peace of mind. Currently, the maximum contribution to a 401(k) is $20,500, and $6,000 for traditional and Roth IRAs.
If you are interested in more ways to utilize your tax refund, contact us here or call (727) 799-1701 to schedule your appointment today. For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being.
