How to Use Your Refund Wisely
The deadline to file taxes has passed, and if you don’t owe anything to the state or federal government, or have already paid it, you may be getting a refund in the near future! The amount of your refund can differ from year to year, but whether you get a lot or a little, you can still use it wisely. MSU Federal Credit Union is here to provide a few options on how to use your tax refund wisely.
Pay Down Debt
Are you in the process of paying down credit card balances? Do you have an auto loan or mortgage that you’re making regular payments on? One way to use your tax refund is to apply it to debts you currently have. Even if your payments are made on time and fit within your budget, paying down debts more aggressively reduces the length of time you have that debt, and in turn reduces the total amount of interest you will pay over the lifetime of your loan. Paying down debt also frees up money in your monthly budget that would have gone toward monthly payments.
Start an Emergency Fund
It’s recommended to have an emergency fund equal to living expenses for 3 – 6 months. It can be difficult to motivate ourselves to save for something that we don’t want to happen, but having that money set aside for any surprises will be well worth it. This can be a daunting and lengthy goal to work towards, but you can bring yourself closer to achieving financial security by giving yourself a head start with your refund!
Achieve Your Savings Goals
Is there a big-ticket item like electronics, a vehicle, or even a home that you’ve been trying to save for? Are you dreaming of traveling to some exotic locale? Is there something that you’ve always wanted to do, but haven’t started saving? Are you currently in the process of saving for it? Tax refunds are somewhat of a windfall in the sense that you don’t always know how much it will be, and it isn’t a reliable or regular source of income. Consider applying it to a savings goal to start yourself out on the right foot, or give a helpful boost to something you are already saving for.