Pay off debt. The way you can best make the most of your tax refund is to pay down high interest debt. Credit cards are almost always the main culprit in this area. Review your accounts and use your refund to reduce or eliminate the credit card balances with the highest interest rate.
Increase or start your emergency fund. If your debt is under control, the next thing to consider is your emergency fund. The general rule of thumb is to have at least 3 months of monthly expenses stashed away in savings. This will allow you to handle unexpected expenses without having to use credit to cover your bills.
Add to your retirement account. Using your refund to make an extra contribution to your retirement account is a very smart choice if you have your debt paid down and your emergency funds in the bank. There are annual limits for contributions for these accounts, so pay attention how much more you can add in 2013 before you make a deposit.
Contribute to the kids’ or grandkids’ college fund. If you have high-interest debt, your emergency fund and your retirement account in order, using this money to create or boost a college fund for your kids or grandkids is an frequently overlooked opportunity for your tax refund. There are a number of different ways to save for college, so consulting with a financial planner is a smart idea if you’ve not already established an account for the future student in your life.
We would love for you to share other ways you have best used your tax refund the comments section below!
