The IRS reports that 75 percent of filers received a tax refund in 2017, with an average refund of $2,763. No matter the amount of your tax refund this year, you can find ways to make it go further. Here are some tips for stretching those dollars.
Putting some of your refund dollars toward something just for you now can make for a nice treat. Just spend within reason. A little something now, may also help curb the desire to make a larger impulse buy.
Add to your IRA
Another way to help yourself is by adding some or all of your refund to an Individual Retirement Account (IRA). This is a good way to boost your retirement savings. If you haven’t started an IRA, this is an easy way to do so.
With a Traditional IRA, contributions may be tax deductible. You’re only taxed on the deductible contributions you’ve made and the earnings you’ve received over time when you make withdrawals. A Roth IRA allows you tax-free withdrawals if you meet certain IRS rules.
The IRS’ contribution limits page will indicate what the annual limits are.
Establish a rainy day fund
Use your tax refund to get started on a rainy day fund or to boost current savings. Set a goal to keep at least three to six months of living expenses on hand for unexpected situations, such as a health problem that keeps you from earning a paycheck.
Add your funds to a Money Market Account, which typically carries a higher dividend than a basic savings account. Save the money for a true emergency. Skip the debit card.
Pay off credit cards
This option may not be as exciting as a new flat screen TV, but the less attractive option is sometimes the one that makes the most sense. Because your credit cards likely carry the highest interest rate among your debts, start here. If you can knock down — or knock out — this debt with your refund, think of all the money you’ll save in interest alone.
Make your money work for you by putting your tax refund to good use.
Article provided by Local Government Federal Credit Union.
The advice provided is for informational purposes only. Contact a financial advisor for additional guidance.