It's officially Tax Season. For many, this could mean you will receive a significant IRS refund upon filing your tax return. Once you file your 2022 taxes and know how much of a return you're getting back, consider these smart ways to make the most of your income tax return.
Put yourself one step closer to financial freedom by using your tax refund to pay down debt. Can’t decide which balance to pay down first? You could aim for the account with the smallest balance first or the account with the highest interest rate. There is no right or wrong answer, so choose the option that will have the biggest impact on your wallet. Just be sure to keep your spending in check so you don’t incur any more unnecessary debt in the future.
We recommend that every household have an emergency savings account with a balance equivalent to at least three to six months of living expenses. That way you can cover any unexpected expenses that come your way, such as medical bills or a job loss. If your savings account has room to grow, deposit all or at least a portion of your refund into it. Your future self will thank you.
If your emergency savings is up to par and your debt is paid off, consider investing your refund in a retirement savings account, such as a traditional IRA or a Roth IRA. Again, your future self will thank you. To get started or learn which investment option may be best for you, contact an FNBO Advisor.
If you have children or grandchildren, you can invest in their future education by starting a college savings fund for their benefit. You can save via a separate savings account or even start a 529 savings plan which could have some tax benefits.
Put your refund to good use by donating all or part of it to your favorite nonprofit organization. Not only will you be helping others in your community, but you will also gain a sense of pride that will last much longer than if you spent your refund on a material item.
Your home is one of your largest assets. Therefore, making necessary home improvements are often a must if you want your home to maintain or increase its value. Use your tax return to help cover necessary home improvement expenses such as a new roof, AC unit or windows. You could even use it to improve its curb appeal by applying a new coat of paint, sprucing up landscaping or mending that fence, just to name a few.
Life is all about quality time spent with our friends and family. While spending a portion of your refund on a vacation won’t positively impact your financial balance sheet, it will improve your quality of life. It’s all about balance. Just be sure to set a vacation budget and stick with it. Following these simple tips will help you plan a vacation without breaking the bank. The last thing you want to do is come back from a relaxing trip to the beach drowning in debt.
One of the most impactful way you can help is by shopping local. For example; You can support local restaurants throughout the year by putting your tax refund in a savings account and using it to order in or eat out. You're helping a local business thrive without impacting your budget. Watch this video for more ways to support local businesses.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.