When it comes to your tax return refund, there are many ways to spend it or invest it!
CPA Michelle Staebell of the New York State Society of CPAs offered up her top recommendations Monday during News 8 at Sunrise.
Staebell said the number priority with your tax refund should be to pay off debt. “I think almost everybody has some credit card debt or some outstanding debt. That’s probably the best use of it. Try to hold back on those impulse purchases and just pay off some of those balances.”
The next item on Staebell’s list is to build up an emergency fund. “I think a lot of people have seen in recent news with the government shutdown the importance of an emergency fund,” she noted. “So three to six months is ideal. If you are reliant on the next paycheck, maybe start putting some money aside so in case that paycheck doesn’t come, it’s not a huge crisis situation.”
If you’ve paid off your debt, built up an emergency fund and still have money left over Staebell has some ideas for you. “If you have more money, invest in a retirement account or maybe an education account for your kids. You can invest in an investment account. There’s lots of opportunities to make that money grow into more money.”
Staebell said it’s also fine to use the money for a large purchase or trip, noting paying for those things in full will prevent having to pay interest on them.
Finally, Staebell explained why not getting a refund – or breaking even – is a good thing when it comes to your tax return. “Most refund are just over-withholding from your paychecks, so if you adjust your payroll withholding you could get more money throughout the year and have the money to pay off those bills ahead of time.” She added, “I think the best situation is a break even on your tax return and get the money throughout the year instead of a large check at refund time.”
Lots more “Smart Money” advice can be found on the New York State Society of CPAs website. Visit nysscpa.org/getmoneysmart.