Tax day has come and gone. Millions of households will be receiving a tax refund check in the coming weeks.
Here are a few tips to make the most of your tax refund dollars (or any windfall you should receive):
- Review your financial goals. Do you want to purchase a house? Pay off student loan debt? Make a plan for your tax refund to help reach your goals. You can be proud of what your tax refund helped accomplish rather than spending it on things that do not last.
- Look at all your debt payments. Pay off the debts that will free up the most money every month, especially pay day loans and credit cards. Then pay off debts with the highest interest rates. Paying off those debts will save you a lot in compounding interest.
- Put your refund in an emergency savings fund so you can pay your next emergency instead of borrowing. Think about interest as something you earn on savings instead of paying out interest on debt!
- Add some of the refund to your Health Savings Account to help with medical expenses.
- Set some of the refund aside to save for unexpected car repairs or home maintenance.
- Make a contribution to your retirement accounts.
- Consider making an extra mortgage payment if all other debts are paid. Additional payments are applied to the principal loan which will increase your equity and decrease the length of the loan.
Remember that a large refund is your interest-free loan to Uncle Sam. You can increase your monthly cash flow by adjusting your withholding amounts to increase your paychecks instead of waiting a year for a refund.
If you had a tax bill this year, now is the time to adjust your W-4 with your employer or start putting money aside each pay period to avoid this situation next year. Call Lutheran Social Services Consumer Credit Counseling Service at 888-258-2227 for an appointment if you need help adjusting your spending plan.Together we can make a difference. Make a financial gift to LSS today.