As many members start receiving their 2022 tax refunds, it is important to think about ways to manage those funds in a fiscally responsible way. Here are some ways you can invest your refunds wisely.
1. Create an Emergency Savings Account
If your car broke down or your air conditioner stopped working, would you have the funds to respond to an emergency? If you wouldn’t be prepared, you are not alone. But you can change that! When creating an emergency fund, you can deposit a percentage of your tax refund into a designated savings account and then set up automated weekly or monthly deposits. Even small regular contributions of $10-20 will add up over time. Then when an emergency does happen, you are prepared and less likely to rely on credit cards.
2. Pay Down Credit Card Debt
Speaking of credit cards, paying down this debt is a crucial step towards creating healthy finances. Start with your credit card balance with the highest interest rates, and use your refund to pay this down. Paying down high-interest credit card debt has 2 benefits: 1) You free up funds that would normally go towards high interest fees 2) Paying down debt gives your credit score a boost!
3. Pay for Your Future
Look at your long-term financial goals. Are you saving for retirement or your children’s college education? It is never too late to start saving, and your tax refund can be a great start. You can make a lump sum contribution to either an IRA or 529 plan.
4. Start a Side Business
Are you always daydreaming about creative side jobs? Maybe a photography business or an Etsy shop? Your tax refund can be the financial start of your new business! Whether it is starting a website, buying inventory, or creating business cards, use your tax refund to take those first steps without impacting your current job.
5. Make Home Repairs or Upgrades
Are there any home upgrades or repairs that could decrease your monthly expenses? Perhaps installing solar panels or replacing a leaky faucet or toilet? Maybe now is the time to upgrade an outdated appliance or bathroom fixtures! Regardless of what is on your list, you can use your refund to make much needed changes in your home – improving the house’s aesthetic while also increasing your resale value!