News and Community
News and Community

What to Do with Your Tax Return

In 2024, the IRS refunded roughly $169 billion to more than 54 million people for an average refund of $3,081. If you are fortunate enough to receive a tax refund this tax season, you have a great opportunity to use it towards your financial goals. No matter the amount, you have plenty of practical options to make the most of your tax refund.

1. Boost Your Emergency Fund

Consider opening an emergency fund – start with at least $1,000 and build up to three to six months’ worth of expenses. Your tax refund can be a significant boost to this fund, providing you with a financial safety net for unexpected expenses like car repairs, medical bills, or job loss. A Money Market Account can earn you a higher return while still being accessible.

2. Pay Down Debt

If you have high-interest debt such as credit card balances or personal loans, your tax refund could help pay down or pay off these debts. You can reduce the amount of interest you'll pay over time and improve your overall financial health by lowering your debt-to-income ratio and possibly increasing your credit score.

3. Fund a Health Savings Account

If you have a High Deductible Health Plan [HDHP], you can use your refund to start a Health Savings Account. You’ll be able to take advantage of tax benefits and build up savings for your healthcare expenses now and in the future. Farm Bureau Bank offers a variety of HSA products with different options for investing and growing your contributions.

4. Invest in Retirement

Another option is to invest your tax refund in your retirement accounts, such as an Individual Retirement Account [IRA] or a 401(k) if you have one through your employer. Contributing to these accounts not only helps you save for the future but may also provide tax advantages, such as tax-deferred growth or tax deductions, depending on the type of retirement account.

5. Save for Goals

Whether you have short-term goals like a vacation, or long-term goals like buying a home or starting a business, your tax refund can be a great way to kickstart your savings. Consider opening a separate Money Market Account or Certificate of Deposit for your goals and depositing your tax refund into it to track your progress and stay motivated.

6. Invest in Education

Investing in yourself through education or skill development can yield long-term benefits. You can use your tax refund to enroll in a course, workshop, or certification program that can enhance your knowledge and qualifications, leading to better job opportunities or career advancement.

7. Home Improvements

If you're a homeowner, you could use your tax refund for home improvements or repairs that can increase the value of your property and improve your quality of life. Some home improvement options include upgrading appliances, renovating a room, or enhancing energy efficiency.

8. Charitable Contributions

Giving back to your community or supporting causes you believe in can be a fulfilling and meaningful way to use your refund. Consider donating a portion of your tax refund to charitable organizations or volunteering your time and skills to make a positive impact.

Your tax refund is more than money in your pocket – it can be a powerful tool for improving your financial well-being and achieving your goals. By using your tax refund wisely, you can take meaningful steps towards financial stability, security, and success. Whether you prioritize saving for emergencies, paying off debt, investing in your future, or pursuing personal passions, the key is to make thoughtful and strategic decisions that align with your financial priorities.

Tags:   financial tips, personal finance, savings