NDSU Extension Service - Ramsey County

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Your Tax Refund

Your Tax Refund

 

                Tax season is here, and for some it's quickly followed by tax refund season. If you're expecting a considerable refund, read through these ideas and stretch your tax refund as far it can go.

                Pay off debt. This may seem obvious, but it can be so tempting to spend your refund on something new or exciting, so it's important to stress that paying off debts should be a high priority. If you have multiple credit cards or loans to pay off, consider your balances and interest rates and pay down the highest interest rate debts first. Think about this as an investment for your future, potentially saving yourself hundreds or even thousands of dollars of interest over time.

                Check on your emergency fund. With some extra money headed your way, now is the perfect time to check on your emergency fund. Don't have one? Then it's definitely time to start building one. An easy rule of thumb is to have at least $1,000 put away in case of emergencies. You might not have that much right now, but you can get a great start by contributing your tax refund.

                Invest it. Your tax refund might have a couple of zeros at the end of it, which feels like a nice bonus right about now. However, consider this – if you invest your refund in an individual retirement account, or IRA, you might be able to add another zero to the end of that number later on, especially if you commit to investing your refund every year.  Another option is opening or contributing to a 529 college savings plan for your children or grandchildren.

                Spend it on essentials. Chances are that if you're a homeowner or car owner, there are countless things that need to get done.  If home is in need of a few essential repairs or purchases, your tax refund can help avoid a dip into the emergency fund.

                Donate to charities.  One more way to spend your tax refund is to take the focus off yourself and consider others. If you would like to contribute more to a favorite charitable cause or nonprofit. Not only will you make a difference for those who benefit from that charity, you can also claim the tax deduction.

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