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PAY DOWN DEBT
The best thing you can do with your tax refund is reduce or eliminate any high-interest debt . Whether you have credit card debt , student loans , or a car loan , first pay the minimum payment for each debt to avoid penalty fees . Then pay all you can towards the debt with the highest interest rate . If your debt is already under control , even making an extra payment toward your mortgage can make a dent in what you owe and save a little in interest fees .
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BUILD UP AN EMERGENCY FUND
A cushy emergency fund of at least three to six months of income is one of the best safety nets you can create . As grown-ups , we realize that bad things can unexpectedly happen – even to us . Lose a job , total the car , receive a difficult medical diagnosis . Any type of unexpected hardship that forces you to dip into your savings should really come from an emergency fund so you don ’ t have to derail your retirement to handle the extra expense .
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CONTRIBUTE TO AN IRA OR ROTH IRA
Put your refund to work by opening or contributing to a Traditional or Roth IRA . The timing is perfect because April 18th is not just tax day this year ; it ’ s also the deadline to make qualifying contributions to an IRA . Contributing to a Roth IRA can be particularly beneficial . Funded with after-tax dollars , your money grows tax-free and is tax-free when withdrawn during retirement .
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CONTRIBUTE TO A VACATION OR HOLIDAY FUND
Vacations are important ! Consider stashing away your refund to pay for a week away . Another idea is to set up a Holiday Fund . Preparing for the annual splurge is smart ! Separating a fund for holiday expenses from your other accounts reduces the chance you ’ ll unintentionally spend the money on something else .
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