It’s tax season, and the anticipation of a refund from the IRS might already have you planning how to make the most of those extra funds. A tax refund can inspire exciting plans for spending new money. Keep in mind though, that tax refunds are money that you’ve already earned, so it’s important to be responsible when deciding how to use it.
The Trend of Smart Money Management
According to a 2023 National Retail Federation® survey, around 50 percent of respondents intended to contribute their tax refund to savings, while 33 percent planned to use it to pay down debt. These survey results highlight a wise financial trend, because the smartest thing you can do with any extra income is use it for necessities, including increasing your savings and decreasing your debt.
Maximizing Your Tax Refund
Whether your tax refund is a little or a lot, these tips aim to empower you to make the most out of your tax refund.
Pay off High-Interest Debt
One of the ways to spend your tax refund is to consider paying down debt, starting with the high-interest debt, such as credit card bills. Paying down or eliminating high interest debt is a smart financial move because it not only relieves the stress of monthly payments and accumulating interest, but allows you to save more money for future endeavors
Let Your Money Grow
Consider saving your refund in a high yield savings account, such as a money market account or a Certificate. These options will allow you to build your savings, offering better interest rates than a regular savings account. Understanding the power of compound interest can turn even a small amount into a more substantial savings over time.
Start to Build (or Add to) Your Emergency Fund
Life happens, so having an emergency fund can be a financial lifesaver. If you’re beginning your emergency fund, consider using your tax refund to build a starter emergency fund of $1,000. If you already have an emergency fund, use your tax refund to bolster it. It’s peace of mind in uncertain times. You can rest easy at night knowing you’ll be okay in those life happens moments.
Help Others with a Charitable Donation
If you are in a strong financial position, consider using your tax refund to make a positive impact with a charitable donation. Whether it’s supporting local non-profits or contributing to global initiatives, your contribution can make a difference. Plus, if you’re a Park View Member, you can utilize our donation tool in online banking to donate directly to local churches and non-profit organizations located in Harrisonburg area. Additionally, charitable donations may come with tax benefits, so be sure to keep track of your contributions.
There are lots of ways you can make the most out of your tax refund. Whether you’re paying off debt, building savings, supporting charitable causes, or investing in your future, making intentional decisions now can set the stage for financial success. So, as you plan your next moves, remember – it’s time to make that money work for you!
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