How To Use Your Tax Refund Wisely

Deanna Rubano

March 5, 2016

For most taxpayers, the light at the end of the tax season tunnel is the hope

of a refund.  Many of us view a tax refund as 'bonus' cash; however, there are

many useful strategies to put your refund dollars to work for you.  So, if you're expecting

a tax refund this year, make sure you have a plan for your money.

Save for a rainy day—

or a stormy one

Although it may not seem like

a very exciting way to use your

refund, the peace of mind that

establishing or adding to your

emergency fund will give you is

priceless. Financial experts advise

that your fund should have about

six to eight months’ worth of

savings in an easily accessible

interest-bearing account. Your

refund is the perfect vehicle for

making a lump sum deposit into

this type of financial cushion.

Reduce high interest


Next to putting money away for a

monetary emergency, paying off

any high-interest debt you may

have is the next best thing you can

do to strengthen your financial position.

Make a budget

and fund it

If you don’t already have a budget,

receiving your refund may be the

incentive you need to create one.

Once you have your budget organized,

consider using your refund

to seed bank accounts for key

purchases such as holiday gifts, car

down payments, college savings

and the like.

Top-up taxsheltered


Using your tax refund to start or

top-up a traditional or Roth IRA

(Individual Retirement Account)

or to contribute to a 401(k) or a 529

college savings plan offers you a

double bonus. Not only will you be

compounding dollars and interest

for your future retirement or college

tuition needs, but you may be

creating a deduction for next tax

season as well.

Invest in a

taxable account

If you have already contributed

the maximum to your tax-sheltered

accounts, consider investing

in stocks, bonds, and mutual

funds either independently or

through a financial advisor who

can guide you.

Go ahead...

Treat yourself!

You deserve a treat. Just make sure

your splurge is a) planned and b)

within your budget. So whether it

is a fancy dinner for two or a getaway

to a longed-for destination—

enjoy it thanks to your tax refund.

After all…you earned it!



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