It’s tax season and for many of us that means a hefty tax return. What is the healthiest and most effective way to view your tax return?
Many people view a tax refund as free money and spend it almost as fast as it hits their bank account. But this attitude is dangerous. You work hard for your money all year, you have taxes withheld during that time, and now the government is giving you back some or all taxes withheld because you had more withheld than your tax liability.
Your tax return is an opportunity for you to create leverage in your financial life.
Here are 5 ways you can use your 2017 tax return:
- Open a high-yield savings account. You can use bankrate.com to research savings accounts and deposit the tax return money for safe-keeping. This can act as an emergency fund.
- Pay for school expenses. Your tax return could be used to pay off all or some of your WKU shortfall, allowing you to minimize the student loans you take out this fall.
- Pay off your credit card debt. It is not abnormal for college students to find themselves in credit card debt. Credit card interest rates are high and not paying hurts your credit score- use this as an opportunity to wipe the slate clean.
- Use it for an experience. Managing money is about using your money effectively to meet your short, intermediate, and long-term goals. It is okay to use part or all your return for a bucket-list item, if these other opportunities do not apply to you.
- Start a Roth IRA. A Roth Ira is a retirement savings account. Starting to save while you are young allows you to benefit from compound interest-and with a Roth IRA your money grows tax-free!
As always, for more information or to meet with a Financial Counselor, contact us at the WKU Center for Financial Success! We would love to sit down with you, go over your specific situation, and help you use your tax refund effectively!