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If you haven’t heard where have you been?, it’s Tax Day. So first, make sure you file your taxes!
A large percentage of people will be getting a refund this year. Sometimes a few thousand dollars. If you are getting a refund, here is the do’s and don’t’s of spending that refund.
Put towards and pay off credit card debt first. Start with the highest-interest rate balance.
Put towards and pay down a high-interest car/auto loan.
Build an emergency fund. A good goal is 6 months of expenses. Some say more, some say less, but it really depends on your personal circumstances, such as job stability.
Pay down your student loan debt.
Open up and fund a Roth IRA. You can contribute up to $5,500/year. This is a tax-advantage retirement account.
Don’t spend it on a new flat screen tv.
Don’t spend it on a lavish vacation.
Don’t spend it on a brand new, flashy car. (If you need a new car, look into buying used).
Don’t spend it on anything that is a “want”, and not a “need”.
The best thing you can do with your tax refund is pay off debt, save it or invest it! I got a pretty large refund this year due to deducting my mortgage interest, but I wasn’t expecting it to be that large. I won’t lie, my first thought was what could I buy with this money. But, I stopped myself and asked a second question: what could I achieve with this money? Therefore, it went straight into my Betterment investment accounts!
Your turn: What are you going to do with your refund?