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Optimize your tax refund by paying off a debt, putting it toward a rainy day fund or investing it!

4/24/2018 in Money Management Tips
Now that your taxes are all filed and sent in, many of you will be receiving a tax refund. Rather than spending that money on something frivolous or unnecessary, you should think about setting up or adding the money to your rainy day fund or by investing it.

Check out our Preparing for the Unexpected with Emergency and Rainy Day Funds blog post for more information about a rainy day / emergency fund and how to set it up. The main purpose of this fund is to have some extra money to help you get through a tough time such as if you encounter an unexpected large bill (a major car repair, broken appliance, lost job, etc).

If you're already on top of your rainy day / emergency fund, you can always invest part, or all, of your tax refund. It's not too early to get on top of your 2018 Roth IRA contribution. We have a comprehensive blog post that covers many investment possibilities based on risk and return. You can check that post out here: 8 Ways to Invest Your Money and Earn More Interest.

Another great way to put your tax refund to good use is to put it toward paying off or reducing a debt. Even if you can only spare a small portion of the refund, paying any additional money towards the principal of a loan will help you save a lot of money in the long run, especially for new debt where your monthly payments are mostly paying interest and not the principal of the loan.

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