By Farm Bureau Financial Services on January 31, 2019
In 2017, the Internal Revenue Service (IRS) reported 111 million refunds were issued, with an average refund of $2,895. That’s not pocket change, and for some, that’s more than a paycheck. So, what do you do when you get that tax refund? Do you spend it? Hold tight. That new TV or spontaneous vacation might be tempting, but there are smarter ways to invest your money and be one step closer to financial security.
PUT A DENT IN YOUR DEBT
Eliminate that credit card balance once and for all with your tax refund. If you don’t have enough money to cover all your outstanding balances, start with the one that has the highest interest rate and move down the rate ladder. By “snowballing” your balances, you’re reducing the amount you must pay in interest, which can be hefty. Isn’t peace of mind worth more than a one-time purchase?
PAY DOWN YOUR MORTGAGE
Get one step closer to financial security by using your tax return money to make an extra principal payment on your mortgage. Adding just one extra payment a year can knock years off your payment plan. Want to see how? Online calculators can help you calculate how many months or years you could shave off your mortgage. Seeing your savings in action can really help put a windfall like your refund check into perspective.
FUND YOUR CHILD'S EDUCATION
A tax return is a great opportunity to start or increase your child’s or grandchild’s college savings fund. It may not seem like much now, but after a few years, you could have a hefty balance to help with the ever-rising costs of higher education. Farm Bureau Financial Services has some options that can help you maximize your college savings.
DONATE TO YOUR FAVORITE CHARITY
Pay it forward by donating your tax return money to your favorite charity. Not only are you able to support a cause you believe in, but you could also qualify for an extra income tax deduction for the following year.
It’s OK to indulge in a guilty pleasure every now and then. A good way to figure out how to spend your tax return money intelligently is to write down all the things you want to save for and prioritize them by importance. This can range from short-term (remember those sunglasses?) to long-term things (like that dream vacation you’ve been wanting to take). If your tax refund check gives you the ability to budget for purchases, then why not? Just be sure to budget wisely; you don’t want to use this as an excuse to let your spending get out of hand.