Tomorrow is the first day of April, and hopefully you’ve filled your taxes. If not, no worries, you still have a few days left to do so to get your tax refund back. Tax refunds can be exciting and you may be thinking you get to go on a shopping spree, but we want to give you some practical ideas to put your tax refund where it matters.
Start an Emergency Fund
If your car broke down, you were to lose your job, or have an unexpected medical expense, an emergency fund can help you through these circumstances. Start with saving up $1,000 and work your way up to three to five months of living expenses. An emergency fund can earn dividends if you save through a savings account or investors club.
Pay Off Outstanding Debts
One of the best methods for paying debt off is called the “snowball” method. Using the snowball, you first pay the minimum payment on each card and then take the remaining funds and add them toward the payment on the card with the highest annual percentage rate. When the card is paid off, you add on to the payment of the card with the next highest interest rate, and so on.
Sometimes, financial planning tips tell you to pay off the credit card with the highest interest rate first, some people want the feeling of accomplishment that comes from paying off an entire credit card. If you’ll only feel like your making progress by paying off your lower balances first, do it; but remember that the most important thing is to pay off those higher-interest cards that might take longer.
Once you’ve started stick with it. When you see you’re making progress, don’t slack off. Using your tax rebate is a great way to start this process.
Fund or Open An IRA
The most popular retirement plan is the IRA account. IRA stands for Individual Retirement Arrangement, allowing individuals (as opposed to groups of people) to arrange for their retirement. Strictly speaking, then an IRA is not an investment, but simply money the tax codes treats differently than the rest of your earnings. If you received a big tax refund that’s great money to put away in your IRA or start one if you haven’t already. CTCU offers multiple IRA’s, if you need more information on how to start saving for your retirement visit our website today or call us at 903-561-2603.
Add to Your Mortgage Payment
Paying down your mortgage is never a bad idea. Use that tax refund to add to your mortgage payment so you’re one step closer to paying off your home!
Lastly, think about having less money taken out of your paycheck for taxes during the coming year. If you’re getting a refund, it means you’ve been giving the government an interest-free loan all year long. Who needs that money more, Uncle Sam or you?