FINANCIAL FOCUS: What are you doing with your tax refund?

According to the IRS, about three out of four Americans get a tax refund each year. How big is that check? On average, it’s about $3,000.00.¹

While it may be tempting to splurge on a shopping trip or spend it on a fun getaway trip, here are some ideas that may pay bigger dividends for you in the long run.

1. Pay down credit card balances or other high-interest debt.
   
   When you think about the money you save by NOT paying high interest on things like credit cards, it makes sense to do everything you can to pay off those bills as quickly as possible.
   
   A tax refund can be a great way to either eliminate or make a major dent in any outstanding balances. When it means paying those debts off early, your budget will almost always be in better shape.
   
   
2. Build up your emergency fund.
   
   Many experts recommend saving building an emergency fund equal to between three and six months of your salary. Then – when an unexpected expense like a car break-down or a sudden vet bill for your pet pops up – you can turn to that money instead of putting on credit cards.
   
   Greg Klinger, GEBA Director of Wealth Management, recommends personalizing or naming your emergency fund. He says that simple step can “help motivate you to contribute to it and resist the temptation to withdraw from it.”
   
   
3. Put it toward a down payment on your next car or buying your first house.
   
   If you’re thinking about replacing your current car soon, a tax refund can be a nice addition to your down payment. After all, any additional money you can put into that down payment can generally help you with lower car payments each month or a quicker “pay off” on your car loan.
   
   If you’re daydreaming about investing in a home, your tax refund can be a smart option to help you get there faster. Using your tax refund to boost the down payment money you’ve already saved can help put you in an even better financial position when you’re ready to put in an offer.
   
   
4. Invest it in the stock market or in a retirement account.
   
   Maybe you’ve always wanted to “play the stock market” but it seems like life and your monthly budget just don’t stretch far enough to give you money for investments like that. A tax refund can be an ideal way to dip your toes in that water without sacrificing your regular budget.
   
   Or if you’re interested in potentially building an even bigger retirement nest egg, consider setting up an Individual Retirement Account (IRA). Funds invested in these types of accounts generally grows on a tax-deferred basis. Plus, if you set up your own IRA, you can invest in it each year in addition to the money you save for retirement through work accounts.