Tax Refund Money Moves

Tax Refund Money Moves

It’s tax refund time! Before you hit the “Buy Now” button on Amazon, take a deep breath and consider splitting up your tax refund to improve your life and happiness long-term. Here are 4 Tax Refund Money Moves to help maximize your refund in 2023.

1. First, Think About Fun.

We just mentioned not blowing your entire refund on Amazon, and we stick by that. But you work hard for your money and you should be able to spend a portion of your refund on something fun! Plus, allocating funds for fun right up front makes it easier to spend the remainder of your refund on other categories.

A weekend getaway with your family, a new TV for movie night or a night out with friends makes life just a little bit sweeter.

Recommended Amount: 10%-15% of your refund.

2. Next, Pay Down Debt.

Yes, we had to say it. If you have high-rate credit card debt or other debt, using a large portion of your refund to pay it down will save you hundreds, if not thousands, in the long run. In addition to easing your financial burden, paying down debt also has a positive effect on your mental health, greatly reducing financial stress and anxiety.

Recommended Amount: 50% – 60% of your refund.

3. Prepare for the Unexpected.

Life happens, and when it does it’s usually inconvenient and expensive. Saving a portion of your refund to create an Emergency Fund will ease the burden when faced with an unexpected car repair or medical expense.

Having funds set aside for these events also keeps you from getting further into debt. This is because you’re not using credit cards or other loans to pay for these unexpected expenses.

Recommended Amount: 15% of your refund.

4. Invest for Your Future.

Consider investing a portion of your refund in the stock market. Here’s why: If you invest just $350 from each tax refund for the next 5 years in a mutual fund or other stock that earns a conservative 6% average yearly return, your $1,750 ($350 x 5) would total an estimated $2,560 at the end of 5 years – that’s  $810 more!* Do the same for 10 years and the estimated return jumps to $5,516 — $2,016 more.**

The point is that investing even small amounts in the stock market could yield significant returns over time. Unfortunately, you can’t earn this rate of return in a Savings, Certificate or Money Market Account today.

While there is risk to investing in any stock, the positive returns have substantially outweighed the losses.

Recommended Amount: 10% of your refund.