I have a lot of people take their tax refund and put it right back into a tax-advantaged account since that’s what helped them to get their refund in the first place.”
Cory’s favorite tax return ideas
It’s that time of the year again when Uncle Sam comes knocking. You either have to pay up or for him, pay out. For those of you lucky enough to be in the latter half, all sorts of possibilities likely surface as to what to do with your new-found fortune.
The temptation for most of us is to go out and spend it. While the rest of us appreciate your offer to stimulate the economy, might I offer a few other suggestions that focus more on you and more importantly, your future.
1) Save it – Your local credit union or financial institution will have options to help build an emergency fund. Most of us in the industry will tell you that you should have 3-6 months of living expenses liquid and accessible for the unknowns in life. This recommendation, of course, depends on a number of other factors concerning your personal finances but is generally a good barometer.
2) Pay down debt – You will most often want to start with your highest interest loans or credit cards first and work your way backward. For many, credit card rates and the interest paid on them far exceeds the interest you could receive by saving the money or investing it. Paying down debt will let you more quickly achieve the other goals listed here as it lowers payments and total interest paid.
3) Invest it – I usually like to ensure people have taken care of (or paid-off) high-interest debt before looking to invest their tax return. Even the more aggressive-earning accounts historically have had a hard time keeping up with interest rates on credit cards. But, once we have credit card debt out of the way, the options for investing and growing your money are many.
A financial advisor can help you to find investments appropriate to your risk tolerance, often in a tax-advantaged solution or product for whatever financial goals you want to achieve. For example, with retirement accounts, reinvesting a tax refund can often help you with more tax advantages and refunds in future years.
4) Enjoy it – If you already have steps one, two, and three under control, then go right ahead and have some fun with your refund; you’ve earned it. Again, a financial advisor can help you to get a solid idea of how on track you are for retirement and other financial goals. If he or she agrees you’re in ‘good shape,’ then maybe Disneyworld is calling your name. (And building a memory is hardly ever a waste of money.)
Cory concludes that if you need help with building your wealth, investment strategies or retirement planning, you don’t have to go it alone. Take a look at the Investments & Insurance menu on our website to see what services we offer. “Stop and see me and together, we can review your unique situation.”
More on Cory’s Stats & Credentials
- Eight years financial planning experience
- BA, Hope College (double major in Business and Spanish with a minor in Economics)
- Life Insurance Certification, State of Michigan, to assist members with life, accident, and long-term care insurances among others.
- Series 7, Series 63, and Series 66 for investments and financial planning
- Accredited Wealth Management Advisor (AWMA) Certification, College for Financial Planning
Cory joins us monthly to share his favorite topics about Wealth Management. Send us a question for Cory; he’s ready to help! Or contact him directly at 269.544.3436 for your free consultation.
Securities offered through First Heartland Capital, Inc. Member FINRA & SIPC. Advisory services offered through First Heartland Consultants, Inc. ECCU Wealth Management Services is not affiliated with First Heartland Capital, Inc. Securities offered through First Heartland Capital, Inc. are: not federally insured, subject to market risk including loss of principal, not obligations of, deposits of, or guaranteed by the Credit Union. ECCU Wealth Management is located at 1551 South 9th Street, Kalamazoo.