3 Ways to Make Your Tax Refund Work for You
Tax day is here and you may be wondering how you can best use your tax refund. According to IRS data, the average refund is about $2,873, which is a sizeable amount of money that can help you to get a head start on some of your financial goals. Below are some of the best ways to use your refund for your financial health.
Knock Away Some Debt
Consider using some or all of your refund to chip away at some debt. If you have any high interest debt, this is the best kind to do away with first. High interest debt is a major wealth killer. When your interest rate is almost the same as your minimum payment, you don’t make much of a dent in your total balances when all you pay is that minimum amount due. Tax refunds can be a game changer in getting rid of this debt faster.
Boost Your Emergency Fund
Your emergency fund is a financial safety net to protect you in the event financial disaster strikes. Having a solid emergency savings fund empowers you to get through financial hiccups in life without having to tap into a retirement fund or going into debt. Aim to have a rainy day fund of about $1000 to keep yourself well-cushioned, financially speaking.
If your savings is in good shape and your debt is under control, consider making your refund work for you by investing it. The average annual return is about 7 percent when it comes to the stock market, unlike high-yield savings accounts, which typically give about a 3 percent return. You could also bulk up your 401(k) if your employer will match any portion of contributions you make.
To learn more about how Madison Monroe & Associates can help you, contact us today.