At 1st Choice Money Center, the name of the game for us is helping our clients with their finances through smart, non-predatory short-term loans like personal loans, title loans and other alternatives to misleading payday loans. In addition to providing such loan services, we also offer expertise and basic financial tips to many of our clients who may be in a bit of a bind.
With tax season on the horizon, one area our clients are often wondering about this time of year is what to do with an impending tax return and the funds it offers. While you may be tempted to go out and get a new flatscreen or a new pair of shoes, there are more productive ways to put these funds to use, especially if you’re had any recent financial issues. Let’s look at some intelligent ways to apply your tax return money this year to improve your overall financial picture.
If you’ve been trying to pay down debt for months or even years but barely making an impact, a cash infusion like your tax return could be a great chance to make some progress. Especially if you receive a significant amount you were not entirely expecting, this is money you won’t necessarily miss – but it could have a huge impact on lowering your interest payments and allowing you to dig out from debt.
One note here: If you have major debts, we recommend paying them down before contributing toward a retirement account. Such accounts only tend to yield between 4 and 5 percent interest, where credit cards charge between 15 and 20 percent interest.
If you do not have major credit card debt, on the other hand, retirement funding is a great outlet for tax return money. The sooner you start compiling these savings, the easier it will be to save up and ensure your retirement years are simple and comfortable. There are several retirement account types to consider if you haven’t already got one open.
If you don’t already have an emergency fund started, one that’s available for things like a car accident or a natural disaster, this could be a great opportunity to get one started – or to contribute to an existing emergency fund if it’s getting low. In most cases, financial advisors recommend having at least three months of expenses saved up in case of emergency.
Finally, are you attempting to kickstart a side gig or some other kind of pursuit? If your other finances are in order, using your tax return funds here could be a good way to open yourself up to further avenues of income.