Tax Refunds can Start an Emergency Fund
Do you have enough money to cover an unforeseen emergency? If you car broke down and it cost $500 to repair it, or if you suddenly lost your job, or if your child was ill and needed a procedure that your health insurance policy doesn't cover, would you have $500 to help offset your expenses? If not, you're in good company. According to NBC News, only 27% of Americans have $500 tucked away for an emergency, meaning that they'll be relying on good luck, credit cards, loans, or other strategies to help them when tough times inevitably come.
What can make the difference? An emergency fund. Unfortunately for many people, starting an emergency fund just isn't realistic and dealing with ordinary expenses is hard enough. However, getting a tax refund can make all the difference. A tax refund can be used to start an emergency fund - even if you can only save $100 - alleviated much frustration and difficulty in the future.
Have you started saving for retirement? According to CNN Money, a majority of Americans have a long way to go in this area. About 3 out of every 4 workers has less than $1,000 saved for retirement! How far will $1,000 will take you now, as a working adult, if you have a job? And to think that those who have $1,000 are the overachievers in this scenario!
So, if you haven't started saving, don't feel bad - just know where you stand. Social Security may or may not be around when you stop working, but either way, you can take action to help yourself. If you already have a rainy day fund started, consider using your tax refund to open a Certificate of Deposit for a retirement. A CD is similar to a savings account, but the funds are essentially stuck in the account until you reach a certain age. Why is a CD a good choice for your tax return? It's an easy account to start that doesn't require investment knowledge, and you maintain total control of the account with a guaranteed rate of return. While you won't make a lot of money from a CD, it's ideal people who don't closely follow the stock market and for those who don't want to risk losing their money.
If you're carrying debt from credit cards, payday advances, or student loans, using your tax return to pay off debt can take an emotional load off your shoulders.
Payday loans or payday advances are the most terrible kind of loan because people often do not fully understand what a vicious cycle of debt the loans create. Taking on a first loan often leads to taking on another (just to pay off the first loan), leading to loan after loan after loan. Hence, payday advances are often called "predatory" loans. If these loans are part of your life, pay these off as soon as possible. You will rest much easier when this is completed!
The cost of health care continues to rise, and there is no reason to believe that the cost will ever go down. So if you or a loved one needs a medical procedure, braces, dental work, or anything else related to your health or well-being, why not use your tax refund to invest in your health and wellness before the prices inevitably increase? Having a happy, healthy family and self is a true blessing, and using your money to be a steward of this is a decision you will not regret.