If you’re expecting a tax refund this year from the IRS, the first thing you should do is review your W-4 withholding forms or the size of your quarterly estimated tax payments and make adjustments to eliminate future refunds. After all, getting a refund simply means you’ve overpaid Uncle Sam and are just receiving your own money back, which most financial advisors agree is an inefficient way to manage your income.
The second thing you should do is figure out how best to spend your tax refund once the direct deposit hits your bank account. Here are the top recommendations for making the most out of your returned money.
- Contribute the maximum allowable amount to your retirement account by adding gold to your precious metals IRA or transferring money to your employer-based pension fund.
- Pay down high interest debt such as credit cards, car loans, and student loans.
- Increase equity by accelerating mortgage payments and paying down the principal on your home loan.
- Improve your peace of mind and ensure your family’s wellbeing by upgrading your healthcare coverage or taking out a bigger life insurance policy.
- Start (or add to) a college tuition fund, such as a Section 529 Plan or a Coverdell Education Savings Account, for your children.
- Establish or pad an emergency account to help cover unforeseen expenses like car repairs, medical deductibles, and home repairs.
- Treat the refund as an extra paycheck and divvy it up proportionally to help cover ordinary weekly or monthly expenses.
- Splurge on something fun—but only if there’s money left over after you’ve done some or all of the above and your finances are otherwise in great shape.
These are just a few ideas about how to make the most of your tax refund this year. Select the options that best fit the amount of your refund as well as your current financial needs to help ensure you spend the money wisely and resist the urge to squander it.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.