According to the Internal Revenue Service, the nation’s taxpayers received an average tax refund of nearly $3,000 a few years ago. This year, while more than 70 percent of tax payers await their refund, Grundy Bank is highlighting five tips to help them make the most out of this year’s windfall.
- Save for emergencies. Open or add to a high-yield 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. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. Where can you get one? Your bank can help set up an IRA, while a 401(k) is employer-sponsored.
- Put it toward a down payment. The biggest challenge that most first-time home buyers face is coming up with enough money for a down payment. If you intend 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, your bank can help with a home equity line of credit.