The tax deadline has come and gone and soon millions of Americans will get a refund from the government. But before splurging on those new shoes, consider putting that money to work.
According to the IRS, the average refund amount this year is more than $3,000. Smart shopping expert Trae Bodge recommends prioritizing paying down high-interest credit cards and building an emergency savings fund with that refund. /
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WATCH HERE“I'm not opposed to treating yourself a little bit, but if you do have kind of a chunky tax return, I would really look at your debt first,” said Bodge.
It's recommended to have at least three to six months worth of living expenses saved away.
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SIGN UP “A lot of us feel intimidated by that goal and then we don't make that first step to get there. So, I think a tax return is a perfect opportunity to put some money into a high-yield savings,” Bodge said. “Even if it's $10 a month, you are building towards something.”
The threat of tariffs should not be an opportunity to stock up on unnecessary things. Instead, Bodge recommends home repairs or upgrades that could prevent costly future expenses.
“Like if your washer and dryer are kind of on their last legs, it might be a good time to look around for deals on those things,” Bodge said. “Use that coupon site to save a little bit more, and then look for obvious additional benefits like maybe 0% financing or buy now, pay later.”
Those who benefit from federal and state child income tax credits could use their tax refund to invest in their kids' future.
“If you have not set up, for example, a 529 fund or CD investments for your children...it's a good opportunity to get that fund started,” Bodge said. “If you prefer to approach things more conservatively, CDs are a great option, bonds are a good option.”
While some people look forward to getting a refund, it also means that people overpaid during the year. It may be worth looking at how much money is being withheld from each paycheck. The same goes for people who consistently owe taxes. Those who are employed by a company can adjust their withholding by completing a new W-4 form with their employer. Take that average refund amount for example, instead of one big check, it could be an extra $250 that paycheck every month.
