How to Use Your Tax Refund Wisely this Year?
These days, we don’t even get a refund. We changed our deductions to the point where we pay “just enough” in taxes and nothing more. In essence, a tax refund is just an interest-free loan to the government at the end of the day. We’d rather have access to that money throughout the year so it can be put to better use.
1. Start or bulk up your emergency fund
We are always talking about the benefits of having an adequate emergency fund squirreled away. When your refund check arrives or gets deposited into your account, this is a great opportunity to get your emergency fund built up to the size that you need.
2. Pay extra on your debt
Paying off debt is a great way to put yourself in a position of financial freedom. We recently became debt free and we want other people to know that feeling as well. I know, it’s tempting to go out and spend your tax money on things you haven’t been able to afford all year.
3. Buy life insurance
This is actually something that is on our agenda to accomplish in the very near future. I have been very candid about the fact that my mother passed away with no life insurance in place. Right now, Dannie and I have life insurance policies offered through our jobs, but we both want to take out additional policies.
4. Contribute to a Roth IRA
One side effect of becoming financially stable is that you start caring more about your future self. Some financial gurus will tell you that you don’t need to worry about investing at all if you still have debt left to payoff.
Sure, you can absolutely take that route if you want to. Something we considered in our journey is that compound interest is your best friend, but it’s an even better friend if you take advantage of it early. Our investment strategy has been pretty simple so far, but you can figure out what works for you.