Refund season is here! Last year, nearly eight out of 10 people received a tax refund worth an average of $2,895, according to the IRS. If that average holds up this year, many taxpayers will once again get a nice check from Uncle Sam.
CPA experts have some advice on how to spend your tax refund:
1: Start an emergency rainy day fund
To begin, prepare for unexpected expenses. You’re trying to get to 3 to 6 months of an emergency fund. Start with one month’s amount and set that in a savings account.
2: Pay off your debt
Next, whatever you own money on, work hard to get rid of it and avoid paying double-digit interest rates. You’re going to take the highest interest rate first and work that piece of debt off first. And that’s going to help you save some money.
Where’s the best place to spend your tax refund?
3: Upgrade your house
Your most valuable asset is most likely your house, so pour money into projects that will raise equity. The kitchen and bathrooms is where to put the money in terms of homes.
4: Put the money toward your individual retirement account
If you don’t have one, don’t put it off. Whether that’s Roth or traditional, don’t get too caught up there. Just get it started. Deshpande said. If you start investing sooner, you get the opportunity for your money to compound.
5: Have fun
After all, you can’t spell “refund” without “fun.” Lastly, so, let’s say you’ve paid off a credit card, or student loans, whatever your next goal is – that 20 percent is there for you to spend as a reward for finishing that goal.
Call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat about your small business health.
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Source: Wyoming County Report