Each year, the majority of taxpayers get refunds. And while some families living paycheck to paycheck depend on these refunds to make ends meet, many of us view it as a source of fun money. (Ever wonder why there are so many sales on large-screen televisions and electronic gadgets during tax season?) The average refund being issued this year is about $3,000. If you’re getting a sizable refund, here are a few ideas for using that money to increase your family’s financial well-being:
Consider improving your insurance coverage. Do you have flood insurance? This important coverage is not included in standard homeowners insurance policies. If you live in a high-risk area, you may want to consider applying part of your refund to purchase this important coverage. It’s also important to note that floods can happen almost anywhere, and one-third of all flood insurance claims are in areas of low risk. You could also think about investing some of your refund into an umbrella insurance policy, which is designed to provide an added layer of liability protection. In today’s litigious world, umbrella insurance coverage can be a smart move for some families. Questions about either of these coverages? Give us a call.
Reduce credit card debt. Even many families that do all the other right things – such as save for emergencies and retirement – can be guilty of letting credit card debt accumulate. You may want to consider using your tax refund to jump-start your efforts at paying off the balances on your credit cards so you can stop paying double digit interest rates.
Fund your retirement. Using a refund to establish or add to an IRA can be a smart move, especially if you’re a bit behind in your retirement savings.