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Seven Worthwhile Ways to Use Your Tax Refund
Tax season is the perfect time to hit the reset button on your fiances. Prioritizing your tax refund to create an emergency fund and pay off debts first will help position you for financial comfort the rest of the year. Your refund can help put you on the right path toward reaching your financial goals. Below are seven options to make the most out of your tax-refund:
Save for emergencies
More than 60 percent of Americans are not prepared for unexpected expenses. You can prepare by opening or adding to a savings account that serves as an "emergency fund." Ideally, it should hold about three-to-six months of living expenses in case of sudden financial hardships like losing your job or having to replace your car.
Pay off debt
Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.
Save for retirement anre more
Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. CB&T can help you set up an IRA, while a 401(k) is employer-sponsored. Don't have an IRA yet? Talk to one of our New Account Officers about opening an IRA account today.
Look into opening a tax-advantaged 529 education savings plan to insure school expenses will be covered when your child reaches college age. Or save for future health expenses with tax-free dollars by investing in a Health Savings Account.
Pay down or mortgage or student loans
Make an extra payment on your mortgage or student loans each year to save money on interest while reducing the term of your loans. Be sure to inform your lender that your extra payments should be applied to principal, not interest.
Put it toward a down payment
The biggest challenge most first-time home buyers face is coming up with enough money for a down payment. If you intent to buy a new home in the near future, putting your tax refund toward the down payment is a smart move.
Invest in your current home
Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home. This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term. If you have more substantial renovations in mind, talk to a Loan Officer who can help make your dreams a reality.
Donate to charity
This benefit is two-fold: giving to charity will make a difference in your community, and you can claim the tax deduction, if you itemize.