Tax season will be ending this month for most people, and you may be one of the lucky individuals who have received – or will be receiving – a refund. If so, it’s tempting to view this as free money, but your refund can also be an opportunity to improve your finances in several different ways, according to Aimee Gilmore, Vice President and Moss Bluff Branch Manager with Lakeside Bank.
“Many people get their money and decide to blow it on a shopping spree, a vacation, or some other purchase on their wish list, but the truth is, wise financial choices can turn that refund into many more shopping sprees and vacations in the long run. The key is patience,” Gilmore says.
One of the smartest things you can do is use the money to set up a rainy day fund, which you can then contribute to monthly. Gilmore says it’s much easier to build on an existing foundation than to start a savings account with just a few dollars. “You can designate the fund for whatever you want – travel, emergency household expenses, eventual down payment for a vehicle, or another budget item. Using this type of fund instead of relying on credit alone for a big purchase can save you a great deal of money.”
If you prefer to reap immediate benefits, Gilmore says you can also consider paying down some of your debt. “If you are carrying a high amount of credit card debt, using your refund to get out from under it is a wise choice. It may not be as enjoyable as using the money for something fun, but the peace of mind of getting debt under control, and the money saved in interest fees, can be priceless.”
If you decide to pay down some credit card obligations, she advises putting the money toward those that have the highest interest rate. If you have one card with 7 percent interest and another card with 18 percent interest, you’ll benefit more by paying down the higher interest card first. “
Some decide to pay on their mortgage or vehicle principal amount rather than their credit card debt, which can also be a wise move, depending on your overall financial situation. “Doing so can knock years off of your loan and save on the cost of interest,” says Gilmore.
Another long-term way boost your finances with your refund is to put it into a Certificate of Deposit (CD) or other higher yield savings account now that rates are increasing. If you have an investment account or college saving account, you can deposit your refund in this help you move closer to your goals.
If you are fortunate enough to not have an enormous amount of debt, there are more practical options for putting your refund to good use, according to Gilmore. If your car needs a tune-up, for example, now might be a good time to invest in it. Too often, many people wait until their car has a big problem before taking it into the shop, but preventative maintenance can save consumers money in the long run. The same is true for preventive maintenance for your home. Putting money toward your car or home can also result in significant return if you decide to sell it.
“There are numerous ways you can use your refund to its fullest potential. Some are practical and some are not-so-practical. It’s ultimately up to the consumer to decide what to do with their refund money,” Gilmore says. “There’s certainly nothing wrong with doing something for yourself, but as you make plans for this money, keep your bigger financial picture in mind.”
Lakeside Bank is an award-winning, locally owned and operation bank. Learn more at www.mylksb.bank.
