A tax refund from the government might be windfall for some, or a forced savings plan for others. In any case, it’s money you didn’t have before.
So, what do you do with this new-found wealth? Take a cruise? Buy some pricey jewelry? Treat yourself to some spa time? You could use your tax refund for fun, but there are better uses for that money – uses that may pay you with benefits.
Here are some smart ways to use that tax refund this year.
Start a contingency fund. There’s no better feeling than having money in the bank when life throws an emergency your way. The washing machine breaks, the car is acting funny, the couch finally gives out – with a safety net emergency fund, you’re more prepared for life’s little surprises.
Open a money market account at your bank to keep emergency fund money available when the unexpected happens. You’ll sleep better knowing that you’re ready for what comes your way, and you can’t put a price on peace of mind.
Pay down expensive debt. Take a look at your monthly statements, see which loans or credit cards have the highest interest rate, and use your tax refund to pay down the balance. You’ll enjoy lower monthly payments and be able to pay down the debt more quickly.
Invest in yourself. Take some classes at the local community or career college and get that certification or accreditation that gets you a good-paying job. Invest in your health by joining a gym or signing up for yoga classes. Keeping yourself healthy and fit can pay benefits every single day. Invest in yourself is a sound investment in a better future.
Lower your insurance premiums. Set the tax refund aside in a money market account so you can increase the deductibles on your car, home and health care policies. You can save hundreds on insurance costs when you take on more of the risk and use your tax refund to insure yourself. Use your tax refund money as a backup in case you need it to pay unexpected expenses, and if you don’t need it, it can appreciate in value.
Start saving for your child’s education. 529 plans allow you to make annual contributions that grow tax-free until the kids head off to college or to another post-high school institution. Make it a habit to deposit each year’s tax refund into a 529 plan and you’ll have a great head start on those tuition payments. The earlier you start saving, the longer your money works for you, earning interest and dividends tax free. For information on 529 plans available in Nevada, visit the Nevada Treasurer’s Office website: http://www.nevadatreasurer.gov/CollegeSavings/CSP_Home/
Save on next year’s taxes. Contribute your tax refund to an individual retirement account (IRA). Your contribution is deducted from your earnings this year for tax purposes, so you may see an even bigger refund next year for deposit into a brighter future.
There are lots of ways to put your tax refund to good use, paying dividends month after month, year after year. Be smart. Put your tax refund to work for you and your family.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.
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