While some may dread Tax Day, others are looking forward to receiving a refund check from the government.
It may be tempting to spend this lump-sum of cash all in one place, but here are some steps you can take that will actually maximize your return and put even more cash in your pocket.
Pay off high-interest debt
If you have a high credit card balance or another loan thatโs piling up, use your tax return to pay it off or pay it down. You may not be in a position to pay off the entire balance at once, and thatโs okay. With the extra money in your bank account, create a debt pay-off plan. This could look like simply paying a bit more than the minimum balance, making an extra payment every few months, or making a one-time extra payment with your entire refund.
Check out our debt calculator to help you budget and make a debt repayment plan.
Deposit into a high-yield savings account
Use your tax refund to open a high-yield savings account or add to your current one. This type of account will help you grow your wealth over time by providing a higher interest rate than a traditional savings account, all while keeping these funds easily accessible. This relatively easy task, along with regular savings habits, is bound to set you up for a financially healthy future.
We offer a variety of savings accounts with competitive interest rates โ discover what works best for your goals.
Build an emergency fund
An emergency fund is similar to savings, but designed for the purpose of unexpected expenses such a medical bills, car repairs, or sudden job loss. We recommend having three to six monthsโ worth of living expenses in an emergency fund. Use your tax return to create your emergency fund โ itโs okay to have a goal of one month of living expenses, for now. You have to start somewhere, right?
Contribute to your retirement account
Seeing the long-term benefits of savings is a little tough for everyone. While retirement may seem pretty far in the distance, putting your tax return directly in an IRA is one of the most beneficial things you can do for your future self. Plus, starting sooner rather than later gives you the benefit of compounding interest and accumulating additional money on your original contribution. By taking the initiative now, you can ensure that youโll have enough money to support yourself when youโre no longer working.
Improve your home
You may be wondering, โHow will spending money benefit me in the long run?โ Doing home renovations is an investment that can increase the value of your property. Even if you donโt have plans to sell your home in the near future, taking on small projects as they arise, like appliance upgrades, will help lessen the blow (and the bill) of a full-fledged home renovation.
ย Remember, your tax return is not simply the government sending you a bonus check โ itโs money that was yours all along. Think about your financial goals and use your refund to help reach them faster.
Our dedicated team has the expertise to help you maximize your tax refund. For more information on savings and retirement accounts offered by Penn Community Bank, visit a local branch, contact us, or visit www.PennCommunityBank.com.
