How to Get Right When You Get Your Tax Return
You’ve paid your dues all year – at least in the form of taxes. You’ve just filed your annual taxes and found out you’re getting a refund.
Before you go spending that money on something lavish, think about using it to save and invest in your future. Here are 5 easy ways you can “get right” and get your finances in order using just your tax refund.
1. Open a Secured Card
If you have bad credit or need to rebuild credit, this is always our first recommendation. Opening a UNITY Visa Secured Card is a great way to help you rebuild credit and get your finances right.
While opening yet another credit card may seem counter-productive, hear us out: this card works much like any other credit card except it’s fully funded by you, which means you can set your spending limit as low or as high as you’d like. And we recommend the low end.
Use your refund, or just part of it, to open a new secured card. Then use it sparingly each month and pay off your entire balance. Make sure you pay your bill on time as well, and soon you’ll notice your responsible credit habits starting to pay off as you begin to build credit. Our UNITY Visa even comes with help for rebuilding your credit the right way.
2. Pay Down Your Debt
If you have a ton of credit card debt, another good use of your refund would be putting it toward your balance. You can choose to start with the smallest balance or the card with the highest interest rate. Either way, pick a card and pay off as much as you can. We recommend continuing to pay down that debt, putting as much extra funds as you have toward it. You may be surprised how quickly you can eliminate an entire credit card balance when you really try.
3. Increase your Retirement Contributions
If you’re currently contributing to a retirement fund, either on your own or through a 401k from your employer, you can use your tax refund to increase your retirement. Place the refund in your retirement account, or start to increase your monthly contributions and use your refund to make up the difference.
4. Build Up Your Emergency Fund
If you’re like most people, you may have had to dip into your emergency fund over the years. Now is a great time to add back to that fund. Doing this can benefit you in more ways than one. First, it gives you an “in case of emergency” account. Secondly, it helps ensure you don’t have to reach for your credit card and add to your debt in times of emergency, which is the last thing you want to do if you’re trying to rebuild credit. Put your tax refund in a high-interest savings account so you can earn interest on your money.
5. Build Your Investment Portfolio
If you haven’t started investing your money yet, the easiest and safest way to start is to open a Certificate of Deposit. In fact, you can start investing with as little as $1,000. The huge benefits of opening a CD is that they yield high returns in interest and you can actually choose the term that fits your needs. Want to invest the money for a short amount of time? No problem! Or maybe you’d rather have it sit there for a longer amount of time. That’s fine too.
When you get your tax refund for the year, the tempting thing to do is use that money for something fun. Instead, consider using it to help get your finances right. Use it to fund a secured credit card to help you build credit, pay down some debt, or invest in your future.