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Five ways to utilize your tax refund that your future self will thank you for

You’ve filed your taxes and the return just hit your bank account. Now what?

While impulse buys are fun, that enjoyment is fleeting. Cody Forbush, an investment strategist for TS Prosperity Group, provided five ways to use those funds that will help you in the long run – which will be much appreciated by your future self.

1. Pay down high interest rate debt 
Credit Cards, store-specific charge cards and any other high interest rate debt is a great place to start when looking where to spend your tax return. Reducing your debt load will allow you to put more of your paycheck toward savings and other costs, which is a win.

“The idea here is to get your money working for you instead of you working for your money,” Forbush said. 

2. Save an emergency fund of 3-6 month’s worth of living expenses
Forbush’s recommendation is three months if there are two income earners in the home and six months if there is one income earner in the home.

“These funds should be highly liquid - savings account, money market, checking account,” he said. “CDs are usually not used for an emergency fund unless the maturity is very short and can be accessed quickly.”

Forbush stressed discipline with these funds.

“Keep in mind, this money is for emergency purposes only and not to use on non-emergency things,” he said.

3. Invest for future goals
Whether you’re saving for a house, looking to bolster your retirement account or create a college savings fund, it’s important to look to the future. You could even save up to open a business.

“Prioritize your future goals, along with a timeline that you want to accomplish those goals,” Forbush said. “Prioritizing will give you a clearer picture of the types of investments and allocations you should be investing in towards those goals.” 

4. Invest for retirement
“Adding more to your 401K or IRA is never a bad choice, as that money gets put aside and often overlooked until it’s time to retire,” Forbush said. 

Forbush explained a traditional IRA allows for tax deferment on retirement savings, while a Roth IRA is taxed as you place it in the account, “so you don’t have to pay taxes on this money again.”

TS Prosperity Group is pleased to offer a new IRA account that is opened and managed completely online. Learn more about IRA Ignite*.

“This is a good subject to review regularly with your investment advisor in conjunction with your tax preparer,” Forbush said. 

5. Home improvements
If the project won’t put you into debt, Forbush said why not get to one of those household projects?

“As long as the home improvement project fits within your tax return, this could be a good investment,” he said. “Picking projects that add resale value to your home will be a big plus later in life. Or picking projects that can improve the efficiency of your home such as replacing old windows, adding insulation or replacing old appliances by updated appliances that use less energy.”

Forbush said the first quarter of the year is a busy time as people consider what to do with their return. 

“Around tax time, this topic gets brought up on a regular basis. We help identify what makes the most sense for that particular client,” he said. “At TS Prosperity Group, we help clients invest toward their specific goals and customize an investment approach that makes sense to help reach those goals. This involves some very personal conversations in a way that clients get to open their lives toward us. We have the privilege of helping sort and prioritize with them so that we can start checking off bucket list items on their goal list.”

 

* Investment products are: 
• 
Not a Deposit • Not FDIC Insured • Not Insured by any Federal Government Agency 
• Not Guaranteed by the Bank • May Go Down in Value
 


About TS Prosperity Group: We want to be your partner in creating a plan that secures and empowers your financial prosperity, while giving you the ability to care for your family today and for generations to come. Contact TS Prosperity Group today by calling (844) 487-3115 to schedule your prosperity planning meeting or visit their website.

Topics: Financial Education, Wealth Management

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