Financial advice: Six ideas for your tax refund

It is tax season, and for many, that means a refund is on the way, and a manager from WaFd Bank in Vancouver has tips on what to do with that money.
Sean Monaghan, WaFd Bank

WaFd Bank manager from Vancouver shares his expertise

Sean Monaghan 
for Clark County Today

Although life can be pretty unpredictable, tax season can offer a bit more financial certainty if you are one of the many who are receiving a refund. Here are some possible ways you can spend — or save — the money from your tax return, along with a few things to think twice about before making a decision.

Save as much as possible

If you do receive a tax refund, consider putting most or all of it into a savings account. It is also a good idea to look at your monthly budget and commit to saving a certain amount of money each month for extra financial security, even if it is just $20. Many financial experts recommend having enough savings to cover three to six months of living expenses. Your savings can also cover unexpected expenses such as medical bills or home or car repairs.

If you are looking to open a new savings or money market account, make sure to read the terms and conditions and, more importantly, compare by researching account options at different banks. Pay close attention to monthly fees, interest rates, minimum balance requirements, and the cost to open an account.

Pay off your debts

Another path you could take toward financial freedom is using your tax refund to help pay off credit cards, student loans, medical bills, or other high-interest debt. To avoid paying interest, do your best to pay off your credit card balance each month or make payments over and above the minimum that is required.

Make improvements to your home

Protecting your home and other large assets involves a little tender loving care. Think about using your tax refund to make improvements to your home. These efforts can pay big dividends in the future by increasing your home’s resale value. Or replacing appliances, equipment, or windows with more efficient options could save you money every month by reducing energy costs — you might even be eligible for energy efficiency rebates through your power company.

Contribute to a college savings plan

Contributing to your child’s college savings plan is a smart investment. Depending on the plan you choose and the state you live in, you could be eligible for an annual tax deduction or credit. Currently, you can contribute up to $2,000 (after taxes) annually per child. When the funds are withdrawn, they are tax-free. 

Prepare for retirement

Planning for your financial future starts now. When you get your tax refund, you may want to add money to your retirement account. If you are starting a new retirement account, make sure to do your homework because there are different rules and restrictions for each type of account, such as the maximum amount you can contribute annually.

Donate to a good cause

The past few years have been financially taxing on many individuals, families, and businesses across the country. If you are in a comfortable financial position, consider donating all or some of your tax refund to a good cause, such as a food bank or a local nonprofit. You might be able to claim your donation on your next tax return but always double-check with a financial advisor to be sure.

What not to do with your tax refund

Basically, try not to overspend or splurge too much. There’s nothing wrong with treating yourself, but think about whether it is really something you want to do and will still be worth it in a few months or if it is more of an impulse thing. Although it is fun in the moment to get something nice, any debts and payments you might have to make will still be there afterward. Consider spending your refund on necessary purchases or putting it into your savings account for emergencies instead. Your future self will thank you.

Sean Monaghan is a WaFd Bank vice president and the branch manager at the Washington Street location in Vancouver.  

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