Preparing for the Future with Your Tax Refund

Preparing for the Future with Your Tax Refund

In 2017, the IRS issued more than $268 billion in tax refunds with an average refund of $2,895.[1] Tax season is over, and if you received a tax refund you may be eager to spend it. However, before you book that vacation or buy that car, it is wise to talk to your tax accountant or financial planner about how best to utilize that money to build a secure financial future. Some ways you can use your tax refund to prepare for the future include:

    1. Pay Off Debt. Review your debt and pay down/off your highest interest debt first, whether that be a student loan, car loan, credit card, etc.
    2. Start/Add to Your Emergency Fund. Are you prepared for large unanticipated expenses? Your emergency fund should be large enough to cover at least six months of living expenses.
    3. Fund Your Retirement. Add the additional funds to your retirement account to create a decent influx or start your retirement savings today. Some funds require as little as $1,000 to start your retirement savings.
    4. Invest It. Your tax refund money is a great opportunity to start investing – whether that’s in the stock market, your career/business, your children’s college education, etc.
    5. Pay Down Your Mortgage. Paying down your mortgage early can help make a significant dent in the interest you’ll pay over time. This will allow you to build equity faster and own your home outright sooner.

As with all things in life, balance is key. You don’t have to feel guilty splurging on an item you have been eyeing, but finding a way to spend part and save part of your refund can help you for years down the road.

Note: A tax refund can feel like winning the lottery. However, you are essentially giving the government an interest-free loan throughout the year. Now is the right time to sit down with your tax accountant to discuss changes to your withholdings that could free up some money to invest throughout the year.

For more information on spending your tax refund or maximizing your tax savings, please connect with us.

Contact Us


Related posts
ING Trusts for Tax Planning

Incomplete Non-Grantor (ING) Trusts for Effective Tax Planning

The incomplete non-grantor (ING) trust is a self-settled, asset protection trust that provides income tax…

Read More
Family Wealth Planning

Family Wealth Planning in a Time of Uncertainty

The current federal estate, gift, and generation-skipping transfer (GST) tax exemption is $11.58 million per…

Read More