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. 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:
- 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.
- 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.
- 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.
- 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.
- 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.
Material discussed in this communication is meant to provide general information and should not be acted on without obtaining professional advice tailored to you or your company’s individual and specific needs. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used by any person or entity, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This information is for general guidance only and is not a substitute for professional advice.
The information contained herein should not be construed as personalized investment advice. Investment in securities involves the risk of loss, and past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this document will come to pass. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There can be no assurances that your portfolio will match or outperform any particular benchmark.
Information presented was obtained from sources deemed qualified and reliable; however, MFA makes no representations as to accuracy, completeness, suitability, or validity of any information within this communication and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any forward-looking statements are believed to be reasonable; however, MFA gives no assurance that such expectations will prove to be correct.