So, you are getting a tax refund. What do you do with it? It’s still COVID times, so many people don’t want to eat out or travel, and you probably shouldn’t just blow it, so here are some things to consider doing with your tax refund/stimulus check/child tax credit expansion.

1.       Emergency Savings

Start your emergency fund. This should be kept in cash, or a money market account because those things are super liquid, and the idea is that you can access this money quickly in case you have an emergency, like your house floods, or your car breaks down or you need a root canal. You should, theoretically, have 3‐6 months of living expenses saved up in case of an emergency, like losing your job. Save for 6 months if you are a two-person household and only one of you has income. If you both work, the odds of losing your job at the same time are slim, so that’s why you can get by with only 3 months.

2.       Pay off debts

This is like, the least fun option, but at least you can take some weight off your shoulders by getting out of some high‐interest debt like credit cards.

3.       Save for retirement, or college, or future travel, or something

If you are like, a truly #responsibleadult then you may want to put your refund in a Roth IRA, or college fund, or just a plain ol’ investment account to buy some stocks/mutual funds with it.

4.       Buy insurance

Are you adequately insured? Like, really, really, really? If you’re getting money you didn’t expect then now may be the time to look into increasing your life, disability, or even homeowner’s/renters, or an umbrella liability insurance policy.

5.       Get your estate planning documents in order

Attorney fees, while not cheap, are sometimes necessary, and if you come into some extra cash and have also been putting off deciding what happens after you die, this may be a good way to spend that refund.

6.       Make those home improvements

Have you always wanted to build a deck, or remodel your bathroom/kitchen? Now may be the time.

7.       Change your withholdings so this doesn’t happen again

If you are getting a lot of money in a tax refund, #smartfinancialpeople will tell you that you shouldn’t probably do that. It’s essentially giving the government an interest‐free loan for the year, and why should you? You can adjust your withholdings by completing a new W‐4 form with your employer to withhold less from each paycheck, and that way you will have more money throughout the year as opposed to getting a big lump sum at tax time.

8.       Blow it on something fun

Ok, life is short. What if, just hear me out, you took HALF of the money and saved it/did something on this list and then took half and bought something fun like a scooter or new, expensive shoes, or my personal #stupidthingtobuy: planner supplies and coins for the app game I play? You essentially split the difference and get to feel good about being responsible AND making a fun purchase.

 

Any opinions are those of Jill Carr and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.