What To Do With a Tax Refund

April 07, 2015

     If you get a refund this year from the U.S. Government, you need to first ask yourself “Why”.  Yes, it seems like free money but you just gave Uncle Sam a tax-free loan for the year.  Most likely, you are having too much money withheld from your paycheck.  Call your accountant and ask how you can pay in just enough.  Then call your human resource office and make the adjustment.  Use the extra weekly money to increase your 401k contribution or fund an IRA or Roth IRA if you do not have a plan at work.

     If the refund is in your pocket or on its way, resist the urge to spend it frivolously.  First, pay down any credit card debt.  With interest rates around 20%, you would be making a great investment.  If you don’t have any debt, make sure you have a 3-6 month emergency savings fund.  One unseen disaster and your financial life could spiral out of control.  Use the remaining money for any necessities that you have been putting off like dental work or house repairs.  Finally, look to making a pre-tax or after-tax investment to beef up your retirement.  Use the funds wisely!

“This is a hypothetical example and not indicative of any investment product.”

“This material is for general information purposes only and is not intended to provide specific advice or recommendations for any individual.  To determine which investment(s)/advice may be appropriate for you, consult your financial advisor prior to investing.”