Now that we have officially passed the tax deadline for 2018, many people will be looking forward to their tax refund check. Here are five smart things to consider doing with that money. Before we move on, you need to understand what we call the "perfect refund". And that would be a refund of $0 where you neither owe money or get money refunded. If you are indeed getting a large refund every year, consider changing your withholding so you don't receive as large of a refund.
1) Build an emergency fund
If you have little to no emergency savings, using your tax refund is a great way to give it an instant boost. Dave Ramsey recommends having a $1000 emergency build for Baby Step 1, then moving up to a three-to-six-month emergency fund for Baby Step 3 (once you become debt-free besides your mortgage).
2) Pay off debt
Take your tax refund and throw it into your "Debt Snowball". This is where you list off all of your debts smallest to largest - then pay as much as you can (as fast as you can) on your debt with the smallest balance. With a sizable tax refund, you may be able to knock out a few debts immediately, thus, eliminating a few monthly payments!
3) Buy something you need
Perhaps, you've been waiting for the right time to put new tires on your car, get some dental work done, or finish a house project - you might consider using those tax refund dollars here. But, we have to say once again, getting an emergency fund started would certainly trump any non-essential purchases or procedures.
4) Save for retirement
If you are debt-free besides your mortgage and have fully-funded emergency fund, using your tax refund to either fund or jump-start your 2019 retirement saving is a great place for the money.
Giving is a huge part of healthy financial plan. We believe that no matter where you are in your financial journey, it's always a good time to give. If you have a certain charity or cause on your heart, using tax refund money could be a great way to fund it.
If you have any questions or concerns regarding taxes or savings, please, don't hesitate to reach out to me.
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