April 14, 2023
Filing taxes is never fun, but receiving a tax refund is!
After receiving a tax refund, you may be tempted to use it towards something you’ve had your eye on this past year—the latest gadget, a designer bag, or a new piece of furniture. But before deciding where the money goes, check out these six ways to reinvest your tax refund to help you in the future!
Pay off high-interest debt.
One of the first things you should consider when deciding what to do with your tax refund is paying off any debt, especially high-interest ones. Focus on eliminating debt with the highest-interest rate first. Once that is paid off, move on to the next-highest interest rate. This is called the “avalanche method.” This method will save you the most money in the long run!
Up your 401k contributions.
Most employers offer full-time employees the ability to contribute to a 401k or retirement fund and most have an employer match. With your tax refund, think about increasing the amount you are contributing to your 401k so you can hit or exceed your employer match. Turn a moderate tax refund into a retirement account that will grow with you.
Put it towards student debt.
43.5 million people in the United States have federal student loan debt with an average amount of around $37,000. Whether you took out a private loan or federal loan, using your tax refund to lower your student loan debt is a smart move, especially with the current student loan pause. Any money put towards your federal student loans goes straight to the principal amount meaning your student loan debt decreases faster.
Boost your emergency savings.
It is recommended to have at least three to six months of living expenses stowed in a savings account. Whether you have six months saved or one month, something is better than nothing. If you haven’t started a savings account, use your tax refund to open an account with Citizens First Bank!
Make an investment.
If you have minimal to no debt, use your tax refund towards an investment. Whether it’s investing in the stock market or real estate or even a product or service that will save you time and money, making an educated investment for your future self is always a good idea. Just remember to do your research!
Increase a home’s down payment or resale value.
If you’re a homeowner or saving up to be one, a good way to reinvest your tax refund is to increase your down payment on a home. This will avoid private mortgage insurance payments and even reduce your overall mortgage amount. For homeowners, use this tax refund to fix that leaky faucet or replace those pesky gutters. Start on that home improvement project you’ve been putting off and watch your home’s resale value increase!
There are many ways to use your tax refund that will benefit you in the future. At Citizens First Bank, we want to be a resource for any questions you may have on how to invest in yourself. Feel free to stop in, give us a call or visit our website today!