The start of every new year comes with various traditions, from resolutions to reflections. But f the new year also signals the beginning of tax season. With your refund coming in soon, it’s important to remember how you spend your newfound extra cash. Here are some Vikki Gerrard La Crosse WI recommendations on making the most of your tax refund.
Pay Off Debt
Starting financially fresh in the new year is a great feeling. One of the ways you can benefit from your tax refund is to use the money to pay off any lingering debts. It could include paying down credit cards, student loans, or medical bills. By paying off accounts with high-interest rates, you’re saving much money in the long run because you’re not paying the compound interest.
There are multiple ways to tackle paying off debt. One way is to focus on your smallest balance and work up to the most significant proportion. Or you can focus on the debts with the highest interest rates first. Whatever method works best for you, tackling debt, is a great way to make use of your refund.
Invest Or Save
Although it may be tempting to spend your refund on new clothes or a vacation, consider investing or saving your refund. The IRS says that up to $4000 of your money can be supported into an IRA account tax-free. An IRA account is a great way to save for retirement in a tax-advantaged manner. And if you don’t have the total amount, you can always make smaller investments over time. Investing can create long-term financial security while also providing potential returns on your investment.
Putting money into a savings account has a lower interest rate and fewer risks than traditional investments. Savings accounts can help to cushion you from unexpected costs, and it’s also a great way to save for large purchases like vacations or home repairs.
Start An Emergency Fund
Emergency funds are often overlooked but should be one of the top priorities regarding financial planning. An emergency fund is a great way to have money on hand in case of any unexpected expenses and can provide peace of mind knowing that you are prepared for anything that may come up.
According to financial experts, an emergency fund should contain at least three to six months’ worth of living expenses. Depending on your circumstances, this amount may need to be adjusted. But having an emergency fund helps to prepare you against any financial bumps in the road. It can help you feel more secure and confident about your economic well-being.
Start by setting aside a portion of your refund in a separate savings account. Once you have set up the account, continue to add to it when you can. An emergency fund can help keep you from using credit cards or taking out loans during times of financial hardship.
Plan A Trip
After setting aside some money for investing and savings, you must mindfully use the remainder of your refund. Setting a budget and sticking to it is vital. You can plan a trip or even treat yourself to something special you’ve wanted for a while.
Whether you splurge on a week-long vacation or staycation, use your refund to plan something that will give you joy and relaxation. Make memories that you can look back on fondly while also being mindful of the money you are spending.
Prepare For Next Year
Finally, use some of your refunds to start planning for next year’s taxes. That way, you can be prepared and better understand what to expect when tax season rolls around again. Rolling your refund over to cover next year can protect your savings in the event that you have to pay more than expected.
You can also use this opportunity as an incentive to make any changes that will help reduce your taxes in the future, such as opening up a tax-advantaged account. Tax advantage accounts are a great way to save money and help you plan for your future. They are also a great way to reduce your tax burden while allowing you to save on taxes in future years.
By following these tips you can make sure that you can make the most of your tax refund this year, so be sure to put these to practice!
Getting a tax refund can be exciting, but it’s essential to use the money wisely. Investing, saving, and preparing for next year are great ways to make the most of your refund and get on track for financial security. Take some time to plan and figure out what will work best for you while also considering all the options available. With careful planning and budgeting, Vikki Gerrard La Crosse WI knows you can make your tax refund work for you and help set yourself up for financial success.