So your tax preparation is done, and you’re expecting a handsome refund. Congratulations! Now all you need to do is figure out how you’re going to spend it. Many people like to splurge on new electronics or a family trip, but that influx of cash can go a long way toward building your long-term financial security. Below are a few ways to make your tax refund work for you.
3 Smart Ways to Use Your Tax Refund
1. Pay Off Credit Card Debts
Paying down debts is actually one of the best investments you can make, especially if you have credit cards with interest in the 20% range. Making the minimum payment every month can cost you thousands of dollars in interest over the long term, so paying them off now provides a fairly substantial return on your investment.
2. Save It for Emergencies
If your car breaks down or the dog needs to go to the vet, do you have enough to cover it? In fact, the vast majority of Americans don’t have the resources to handle a $1,000 emergency. Tax preparation experts say putting your refund away can provide valuable peace of mind.
3. Open an IRA
Both traditional and Roth IRAs can provide significant tax benefits while allowing you to build up supplemental savings for retirement. With a Roth IRA, your money will grow tax-deferred, while a traditional IRA lets you withdraw your future earnings tax-free. Your tax preparation professional or financial advisor can help you decide which approach is best.
If you haven’t taken care of your tax preparation yet, the CPAs at Erie & Associates, P.C. have the expertise to ensure you get every deduction you’re entitled to. They’ve been serving individuals and businesses throughout Texarkana for over 30 years, building a reputation for accuracy and friendly service. To learn more about their services and make an appointment, visit their website or call (903) 792-6651.