3 Simple Ways to Make the Most of Your Tax Refund
We've scoured the internet for what we think are the three best and SIMPLEST tips to get more out of your tax refund. Let's face it. It's so easy to just blow through that money you get back from the government. SunTrust Bank found that 60% of Americans expecting a 2016 tax refund this year plan to save at least half of it, signaling that saving is currently a key priority for many individuals. But let's get real. Even if you put it in a savings account - next thing you know, it's gone! Where? Well, if you make the most of it, maybe you're less likely to forget how you blew it.
Get caught up on old bills and pay down debt.
A tax refund can be a saving grace to getting caught up with overdue bills including the mortgage payments. This can prevent you from losing your home or car, or save you money in interest and penalties. And bonus... it can stop future damage to your credit report. If you can be DEBT FREE by paying OFF debt with your tax refund, do it! Nothing feels better than the freedom of living without financial obligations weighing you down.
However, you may want to think twice about paying that debt if you're planning to file for bankruptcy. Also, don't try to pay of "Zombie Debt" -- the debt that is old enough to be off your credit report and past your state's statute of limitations.
Contribute to a Roth IRA.
A ROTH IRA allows you to put money away that will grow to be tax free after age 59 1/2 (as long as you've had the account open for at least 5 years). For example, a one-time $2,700 contribution that earns 7% on average per year will grow to be worth over $10k tax free in 20 years (however, earnings may be subject to taxes and penalties if withdrawn before age 59 1/2). Earnings can also be used penalty free for education expenses or a first-time home purchase. Since it has no effect on your current tax liability, if you are eligible you can make a contribution of up to $5k—$6k if you turned 50 or older—to a Roth IRA for last year, even if you've already filed your tax return. You have until April 15th to make a contribution for last year. Sweet!
Make Home Improvements
For under $1,000, you can make home improvements that will improve your quality of life and your attitude. You could repaint one or more rooms, install new bathroom faucets, buy a tankless water heater (instant hot water!), add new landscaping, or organize your garage. Try replacing an inefficient appliance to double the benefits. You could be wasting a few dollars monthly on inefficient appliances and those dollars add up over time. You'll enjoy a new appliance, and your utility bills could be lower as a result.
Increasing the value and enjoyment of your home is smart long term money management.
If you're still not sure what to do, use the 50/20/30 formula. Use 50 percent to pay down debt; 20 percent to save; and 30 percent to spend.
These tips provided by WomensMoney.org