These ways to save your tax refund can kickstart your money plan. There are lots of ways to save money, but other priorities may derail the best laid intentions. {Take it from someone who had the best intentions of saving that fat tax refund check in my youngers years, only to wind up with bags of N.Y. & Company clothes and Isaac Mizrahi shoes} Stashing away that tax refund can save a woman from herself 😉
#1 Pay Down {or pay off} a debt. You can put an end to a lingering credit card, auto loan or student loan by using your tax refund to pay it off or pay it down. Making the minimum monthly payments on these debts results in more interest paid over time. By paying more than the monthly minimum, you’ve found a way to save on interest in the long run…and begin the road to financial freedom.
#2 Stash the money away in an emergency fund. Most financial experts recommended having 3-6 months of expenses {not income} in an emergency fund. The savings of the average American is typically far below this goal. Use your tax refund to fund unforeseen emergencies. By having 3-6 months expenses set aside, you will be avid the temptation to get back into debt when an emergency arises.
#3 Save the money for a big purchase {Also called “sinking funds” by Dave Ramsey or “freedom account” by Mary Hunt} See a car purchase or a big home improvement project in your future? Use that refund as a way to save for it now.
#4 Invest it for retirement. The maximum contribution for Roth and traditional IRA’s has increased in 2013 to $5,500. Use your refund to open and continue contributing towards your retirement. Depending on your age and your risk tolerance, you can invest in a variety of mutual funds.
#5 Save for your children’s college. College costs are rising every year, if you have small children, get a head start on their college by opening an Educational Savings Account (ESA) or a 529 plan with a solid mutual find company.
Getting a tax refund isn’t the best way to save money {after all, you’ve given the government an interest free loan}, but it’s a start in the right direction. We used our tax refund this year to put in an emergency fund and in some of our sinking funds. Seeing the amount there, gave me motivation to keep saving for the rest of the year. By putting your refund in utilizing one of these ways to save, you’ll find motivation too!
