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Health & Fitness

HOW TO EFFECTIVELY USE YOUR TAX REFUND

If you’re one of those lucky enough to receive money back on your taxes, while it may be tempting to splurge on that expensive purse or 7-day cruise, it’s important to remember that your refund can go a long way towards improving your personal finances.

1.) DEBT REDUCTION—For the biggest long-term payoff, you’ll want to prioritize your loans and put your refund towards the one with either the highest interest rate or the smallest balance.

2.) EMERGENCY FUND—Any financial advisor will tell you that the existence of an emergency savings fund is the true marker of fiscal health; however, it’s not something that most of us can build overnight.  Generally, this type of savings takes diligence and patience, but your tax refund is a great place to start.

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3.) RETIREMENT ACCOUNT—With the uncertainty of the social security system, saving for retirement has never been so important.  Luckily, there are an abundance of options for those looking to accrue money for later access, so by placing your refund into a retirement account, you will be giving your money a chance to grow.

4.) PRIORITIZE MULTIPLE GOALS—At any given time, most of us have things we need to accomplish which require us to spend money.  Whether it’s to eventually get a new car or fly home to see family, put your refund towards those goals so you can start saving.

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5.) STRIKE A BALANCE—While many of us have trouble spending money on ourselves—especially when things are tight—balance is still incredibly important.  Yes, discipline matters; however, we cannot be restrictive 100% of the time.  Don’t be afraid to spend a small percentage of your refund for an immediate purchase or experience, so long as the rest goes towards your financial improvement.

In the end, your refund is still coming from long hours at work, so be purposeful with how you spend it.  If it can go towards accomplishing your goals or making sure that your future is a little bit brighter, pay attention to how great it feels to know that your finances are in line and use that extra bit as a starting point for continued saving!

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