April is Financial Literacy Month, created to empower consumers to establish and maintain healthy financial habits. One financial decision that might be facing consumers in the coming weeks is what to do with a tax refund. The Better Business Bureau Serving Metropolitan New York advises consumers to consider a few options that can provide some long-term financial benefits.
“Your tax refund reflects money you’ve earned, so it’s important to think about how to use it wisely as it can help set you up for a more financially stable year,” said Claire Rosenzweig, President and CEO of the Better Business Bureau Serving Metropolitan New York. “Now is also the time to review your tax deductions to be sure your with-holdings are on target for your situation.”
Here are some options for tax refund recipients:
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Pay down your debt. Use your refund for debt relief such as paying off a credit card. Paying off (or paying down) the debt can save you a significant amount of money in interest expense over the long term. You can also apply the refund toward other debts, like a car loan or a home equity loan.
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Consider savings options. It may be beneficial to put the money into a savings account or CD and allow it to grow. It’s always helpful to have a savings account to draw from if a major car repair bill, medical emergency or other unexpected expense comes along. That way, you won’t have to borrow money and add to your debt-load. Investigate the wide array of savings options, ideally federally insured accounts, from banks, thrifts or credit unions to find the best interest rates. Always be sure you understand the terms and conditions affecting accounts including things such as deposit requirements, withdrawal restrictions or penalties.
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Invest in your home. Using the money to spruce up your house may add to its property value, especially if it brings your home in line with similar houses in your area. In the short term, you may be able to cut energy costs by investing in new insulation, windows or appliances. Unlike vacations, luxury cars, or other discretionary expenditures, your remodeling project might recoup a significant chunk of its cost someday. Consumers can check out BBB Accredited contractors, suppliers and other home improvement professionals at www.newyork.bbb.org.
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Invest in yourself. Enrolling in college courses or vocational training may provide you with the skills and opportunities to further your career or even change to a better paying career.
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Save for Retirement. If you have no credit card debt and three to nine months’ worth of living expenses in emergency savings, you can further strengthen your financial position by saving for retirement. Individual retirement accounts (IRAs) and 401(k)s are the best places to save for your retirement. Most retirement accounts allow you to defer taxes on the money you save and the returns you earn within the account. The plans may have other advantages such as matching contributions from employers to retirement plans such as 401(k)s.
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Donate to Charity. You may want to donate some of your refund to a charitable organization. A gift to a qualified charitable organization may entitle you to a tax deduction when you file your taxes for 2013. Check out reports on charities in Metro New York area at
www.ny.give.org.
For additional information about saving, investing and managing your personal finances, go to
www.bbbmoneynow.org.
For more tips you can trust, visit
www.newyork.bbb.org, and to sign up for our weekly scam alerts, visit
https://cbbb.wufoo.com/forms/email-sign-up/.
