Receiving the much-awaited tax return is always exciting. But before you treat your tax return like a gift, remember it was your money all along. It’s smart to have a plan in place before receiving your tax return, or it may be gone before you know it.
Start/Increase an Emergency Fund
Consider starting or increasing an emergency fund with your tax return. This can help you in the event of unexpected major expenses like a job loss, medical emergency, or even random car troubles. And it’s impossible to know when these will happen! When they do, an emergency fund can help alleviate any monetary stress you may have and allow you to focus on getting back on track.
Eliminate Debt
Use your tax refund to immediately pay off any credit card or loan debt you may have. Although it’s not the most fun way to spend this check, you won’t regret it when you move on without worrying about your debt, large or small.
Invest in the Stock Market*
If you don’t have any debt to pay off and your emergency fund is intact, consider investing in the stock market. Although the market’s fluctuations can pose a risk with your money, it could have great effects on your wallet. This is a smart option if you are able to keep your money invested here for the longer term.
Save for Retirement
You can save your tax return for your retirement fund through direct deposit. Doing this can even qualify you for a tax reduction! If possible, start saving for retirement as soon as you start making a paycheck. Experts agree that everyone should start saving for retirement as soon as they can—ideally in your 20s.
Spend it on Essentials
This may seem obvious, but oftentimes, tax returns are spent on a whim—on an expensive dinner or to go on a shopping spree. Before you make a quick purchase, remember the essentials on your to-do list—that overdue tire change or good winter boots.
While many of these tips may not seem like an exciting way to spend that check, that feeling when you’re less stressed and more financially secure is priceless.
*Please consult your financial advisor. Community Banks of Colorado not give financial advice, nor do they employ financial advisors.