The federal tax deadline of Wednesday, July 15 (recently extended in response to COVID-191) will be here sooner than you think. And many of you may be excited about the possibility of receiving a sizable refund. After filing taxes, most refunds will be issued within three weeks. If you’re receiving one this year, it’s the perfect opportunity to improve your financial situation. Data from the IRS shows the average tax refund in 2019 was $3,143.2 Whether you’ll receive less or more, this windfall could make a difference in your future. Consider these three smart uses:
- Ramp up your emergency fund. Use your refund to build or replenish your emergency savings. You’ll achieve a better sense of financial security by having a cushion for those unexpected events, such as a job loss, illness, an accident, or a natural disaster.
- Pay off high-interest debt. Have a credit card or loan balance that seems to never go down? By significantly lowering your debt, you’ll be left with paying less interest and having smaller payments. And soon enough, you’ll be moments closer to debt freedom.
- Contribute to your retirement account. Investing your refund in a retirement account such as a 401(k), traditional IRA, or Roth IRA with potential tax advantages can help create a better position for you in your golden years. In addition, you might be able to deduct some of the contributions on next year’s return.
Whether you spend it or save it, be sure to use it wisely. Remember it’s not free money, it’s money that you’ve earned. Need advice or further guidance on how to best leverage your refund? Reach out to us–we’re here to make a difference by striving to help you make smarter financial decisions.
This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.
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