As we start the tax season, some of us may be fortunate enough to get a tax return. Now before you dream of how to spend your windfall, here are a few ideas to ensure your money is working for you.
If you don't have an emergency fund yet, your tax return can be a great way to start one. Building up your emergency fund will give you options in case you lose your job, or need to make unexpected repairs to your home or car. In short, you have a financial cushion to deal with whatever surprises may come your way.
Consider using your tax refund to pay down your debt. If your credit card charges a 15% interest rate, but your savings account only earns you 1% in interest, it makes sense to pay off that credit card.
If you have an emergency fund and your debt is under control, then a tax return can be a great way to boost your retirement savings. Most Americans have not saved enough for their retirement. Consider adding to a retirement account, such as a Roth or Traditional IRA.
Although it can be tempting to spend your tax return on something more exciting, we also have to remember that financial windfalls don't come every day. As such, it's important to take a moment and be thoughtful about how to maximize your good fortune.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.