It's that time of year again. The IRS will begin accepting and processing 2020 tax year returns on Friday, February 12, 2021 and Thursday, April 15 is the due date for filing 2020 tax returns or requesting extension of time to file.
While some people are biting their nails over how much they’ll have to pay, others are eagerly anticipating their refunds from Uncle Sam. Below are a few smart ways you can put your tax refund to work for you.
Make a Down Payment on a New Car
If you’ve been thinking of trading up or buying a new car outright, your tax refund can help you bolster your down payment so you’ll have to pay less for the vehicle over time. The larger your down payment is, the bigger your interest cost savings are.
Use it to Help Pay Off Existing Debt
Sometimes, the best place to use your tax refund is on your debt. Reducing your debt can improve your credit score by improving your credit utilization ratio. It can also save you money in interest over time and lift a huge weight off your shoulders. Even better, that frees up your finances for more positive and productive future pursuits.
Save It for Part of Your Down Payment or Closing Costs on a Home
If you’ve been dreaming of buying a new home but haven’t been able to save the money to do so before now, this is your chance. When combined with first-time buyer programs, your tax refund might be the difference-maker when it comes to buying a home. What a huge gift to yourself and your family!
Remember when purchasing a home, the larger your down payment, the less you’ll ultimately have to pay in interest on your home.
Add It to Your Emergency Fund
Just think what a difference it can make to your emergency fund to have that extra bit of money to help smooth things over when life rains down on you and your family. The goal for most families is to have a rainy day fund that can manage living expenses for six months of missed work at a minimum. After the great recession, many financial advisors recommend one full year of expenses.
If you have a home, own a late model and functional car in good mechanical condition, have paid down most of your existing debt, and have a sizable emergency fund, the next best thing you can do with your tax refund is to invest it. Investing gives you the opportunity to really put your money to work for you.
Save a Little for Something Fun!
There’s nothing that says you can’t have a little fun with your tax refund! You earned it after all. Put a little bit of that money toward a fun family adventure or a special night with the love of your life. Or even buy yourself that goody you’ve had your eye on for months.
We’re Here to Help!
Whether your goals are to build wealth, purchase a home, buy a car, or pay off existing debt, your tax refund is a great way to speed up the process. Simply stop by any branch location or give us a call at 800-336-6309 to learn about the many ways we can help with all these things and more.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.