Maximize Your Tax Refund
The only
thing better than getting your taxes filed and out of the way for the year is
knowing that a tax refund is headed your way. It can be tempting to conjure up
ways to spend that money - a quick trip to Vegas, a new gaming system, a fancy
new outdoor pizza oven, or the ever-popular shopping bonanza.
But we would be
doing a grave injustice if we did not suggest you use a little more caution
with that money. Last year, the average tax refund was $2,753, and many people
are seeing higher returns this year due to changes the IRS made to counteract
inflation. While that amount may not seem like a windfall, it could be enough
to right the wrongs of your financial situation. If you're not sure how to
optimize your return, consider two important options - debt consolidation and
savings.
Tackle
Debt
While this
may be a less exciting alternative to booking a weekend vacation, paying off
credit card debt is a crucial step toward creating a healthy financial picture.
Put your refund towards the credit card balance with the highest interest
rate—this is the card costing you the most in the long run. The benefits of
paying down debt are two-fold: freeing up funds that would normally go towards
high interest, plus giving your credit score a boost.
Build
Your Savings
How prepared
would you be in an emergency? If the mere thought is stress-inducing, you are
not alone. Over 57% of Americans are unable to handle a $1,000 unexpected
expense, and 81% of Americans did not increase their emergency fund last year
at all.
When creating
an emergency fund (or even just saving money for a rainy day), you can deposit
a percentage of your tax refund into a designated savings account and set up
automated weekly or monthly deposits. Even regular contributions between $50
and $100 add up over time, and when the unexpected happens, you will be less
likely to rely on credit cards.
You should
also consider investing in a certificate of deposit (CD). This is a type of
savings account offered by banks and credit unions where you agree to keep your
money in the CD without taking a withdrawal for a specified length of time. In
return, you earn interest on that sum in the form of an APY percentage.
Another way to save is to open an insured money market account. This is a
high-yield savings plan with no fees or early withdrawal penalties. A money market
account (MMA) is a type of deposit account that allows you to earn interest on
your funds, while also providing easy access to your money if needed. Money
market dividends are earned daily and paid monthly. There are no penalties for
accessing your money market funds early; even the interest that you earn can be
withdrawn once it's posted to your account!
Telhio Credit
Union members have many savings options, as well as debt consolidation options,
at their disposal. Access these benefits, along with many more services at
www.telhio.org.
