Expect a refund this year? Great! Before you run out and spend money frivolously (and we know you would NEVER do that), we suggest you take a moment to consider some wise ways to save and spend that windfall.
According to online financial resource Nerdwallet, the average refund for tax payers in the past few years has been close to $3,000. For tax year 2018; however, the IRS says the average refund is down to just under $2,000 due to the tax code overhaul. So don’t be surprised if your refund is less than you are used to, but it might still provide you with a great opportunity to do some meaningful saving and/or spending.
Bear in mind if you receive a tremendous refund amount, it is likely that you are having too much earnings withheld and could get more in your paycheck throughout the year. So check with your human resources dept about adjusting the withholdings on your W-4.
Of course cushioning that Emergency Fund should be a priority. So take a chunk (maybe 25%) and put it directly into that purpose. Most financial experts recommend three-to-six months of living expenses to make a comfortable cushion—more if you are self employed. Most Americans are missing that mark by a mile. According to new data by GoBankingRates (which tracks Americans’ savings) 58% of Americans have less than $1,000 in savings. Make it a priority to be better than the average American, financially speaking. Put the cash in a safe, easily accessible account. State ECU’s free Kasasa Saver account is a great option—and currently earns 0.75% APY on balances up to $50,000.
Here’s another important savings option—boost your retirement account. If you have a traditional IRA, you can put this savings to work to reduce your 2019 tax bill. And doing it now means you don’t have to think about it at the end of the year.
Pay Down Debt
Another no brainer, right? Especially if you have any loans or credit cards with significant interest rates. Pay them down, or even better, pay them off!
Your car is important—especially if you use it to commute daily. So make extra certain that it is being maintained properly. Perhaps your brake pads need to be replaced ASAP in order to not have to replace the rotors? Now is the time. Smallish costs now prevent big costs later.
Fix the House
Your house is your most important asset—and capital improvements make good financial sense. You might have a potential issue lurking around such as that leaky roof, which will turn into a major problem when the monsoons hit later this year. Avoid headaches and really big bills by giving your home the attention it deserves.
For Good Health
This is another very important way to spend that refund. Have you been putting off dental work? Maybe it is time for one of the kids to get braces? Or maybe you have been skimping on some necessary doctor visits and tests. Do it now! This can save you much more distress and money down the line.
Refinance Your Mortgage
You may find that there is still a good chance that your mortgage loan rate is much higher than what is currently available. But you understand that you must still pay closing costs and fees. That refund might just be the ticket, and let you save thousands of dollars on mortgage interest over the life of the loan. Give the mortgage experts at State ECU a call and find out what you need to know.
Prepare Your Home for Spring Selling Season
If you are planning to put your home on the market this spring—here’s the cash to spruce it up. Home improvement projects can certainly increase the value of your property. According to Remodeling Magazine’s 2019 Cost vs. Value Report, some of the top home improvement returns in the Mountain West region include garage door replacement, minor kitchen remodel ( such as energy efficient refrigerator, hardware upgrade, and mid priced sink and faucet), and replacement of the entry door (steel).
Spend it on Something You Want
Of course, there is nothing wrong with splurging a bit—just try to keep it under 10 percent of the return. And remember that experiences are always a better option than things. Maybe it is a good time to start a gym membership or attend a performance at PopeJoy Hall.
Improve Your Insurance Coverage
Perhaps you skimped on your car or home insurance, or took a high deductible. Now is the time to reconsider. This extra cash could earn you peace of mind with more coverage or a less heft deductible.
Invest in Yourself
Perhaps you want to dip your toe into a new career by taking an introductory class to InDesign or enhance your skill set to boost your current career. Or maybe you even want to learn a skill like xeriscape gardening to enhance your home. Go for it!
This is also a good time to pay it forward. There are many charities and worthy organization that would cherish a donation—especially at this time of year when donors aren’t as active like during the holiday season.
On a final note, for those of you who are just getting ready to get your 2018 taxes done (or do them yourself), remember that time is money and get organized. Of course, organization won’t save you any actual green but will save you time (which is sometimes a reward in itself). So gather up all pertinent information such as W-2s, 1099s, receipts, mortgage interest statements, 1095 documents showing healthcare coverage, any profit or loss statements from stocks/funds, and last year’s tax documents.