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Friday, February 1, 2013

4 ways to use your tax refund to strengthen your overall financial situation


If you are anything like me, you’ll be more than tempted to use your tax refund for that flat screen you’ve wanted, or maybe that weekend vacation you keep putting off. It feels good to finally get those material things you’ve “needed”. However, like most material indulgences, the charm wears thin and quick…especially when an emergency comes up, or reality hits that you should invest more in your future.

I asked our experts here at Family Services, Inc. for different ways to use a refund that will leave you feeling secure, and confident about your financial situation.


 1.       Pay off/down debt: This encompasses a lot. Who doesn’t have debt these days? Pay off a credit card balance. Double up on a mortgage payment. Doing this once a year can shorten your overall payment period (provided it's allowed under the terms of your loan). If you’re not a homeowner, apply this trick used for mortgages to your student loan debt. Paying down debt, whether it’s a credit card, car loan, mortgage, student loan, or any other kind, is usually a guaranteed return equal to the interest you would have otherwise paid.


2.       Make an emergency fund: If you have your debts under control, and don’t feel it’s necessary to make an extra payment, then your tax refund might be an excellent starting point for building an emergency fund. Personally, my refund will be put away as “emergency funds”. The other day I left work to find that I had a flat tire. Needless to say, I had NO money to pay for this unexpected expense and was forced to charge it, maxing out my credit card!


3.       Invest: If you have no debt and a healthy emergency fund (kudos to you), then you can always look to the future. A tax refund can be used to put a down payment on a house, buy a car, or help pay for an education for you, or the little ones (look to ESA plans and 529 plans). Try one of these: 401(k), 403(b), Roth IRA, Traditional IRA, SEPs. Have questions? One of our licensed financial coaches can help! The purpose and the time frame will help you decide the kind of investment you should be looking at.

              
4.       A savings account: Instead of a regular savings that would perhaps hold your emergency fund, try a Christmas club account. Christmas is the same time every year, but it still catches the majority of people off guard. Even better, invest in a Certificate of Deposit account, similar to a savings account but with higher interest for your benefit.


Go to www.fsisc.org or call 843-735-5522 for information or assistance.

Written by: Sarah Cornwall, Marketing Resources Assistant at Family Services, Inc.