It is never the wrong time to start planning for tax season. This upcoming tax season will be significant to many due to the impact of Covid-19 on the workforce and the economy. Many may have to compensate for lack of funds during the pandemic and find themselves deeper in debt than they ever imagined. To help, here are seven tips on how to properly manage your tax refund.
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1. Pay Down Debt
Make a list of your debt, whether it is credit cards, car loans, student loans, or personal loans. Prioritize which debt you would like to pay down/off first, then set an amount you will apply to that debt. Create/Add to an Emergency Fund. Financial experts recommend that individuals should always have up to six months of income saved and available. This may sound impossible to some, but tax season is an excellent time to start tucking away some funds for a rainy day.
2. Create/Add To An Emergency Fund
Financial experts recommend that individuals should always have up to six months of income saved and available. This may sound impossible to some, but tax season is an excellent time to start tucking away some funds for a rainy day.
3. Start/Add To An Individual Retirement Account (IRA)
Anyone can open an IRA whether they have a 401 (k) through their job or not. Currently, up to 6000 can be put into an IRA and up to 7000 for individuals 50 or older (as of 2020). Depending on if it is a Traditional IRA or a Roth IRA determines how your money is taxed. Experts recommend having 10-12 times your current income to live comfortably during retirement.
4. Invest In Stocks
Stock investment is excellent for those who are already financially sound and secure. Through the power of the internet, many are learning about stock investment on their own. There are also a few stock investment applications hitting the app stores. But for those new and who would like a bit of assistance, a stockbroker is a great way to go.
5. Improve Your Home
Go through and see if any repair or maintenance needs to be done to your home. Taking care of the little things early will help them from being big things later.
6. Donate To Charity
There are countless positive charities to contribute to, and tax season is an excellent opportunity to be generous with your funds. You can also document your donations on your taxes.
7. Improve Yourself
Learning a new skill set is an excellent way to enhance yourself and your lifestyle. Perhaps you need a few extra courses for a degree, or you want to learn a new language. Whatever it may be, it is always positive to make yourself more valuable.
Being financially responsible is not always easy, especially if you are like me and did not learn proper money management early on. But it is never too late to learn and make a change for the better. Something simple like properly managing a tax refund could completely reshape a person’s entire year! If you know someone who could benefit from this article, please share it.