If you have a refund check coming your way, consider using it to bolster your personal balance sheet.
If you have a refund check coming your way, consider using it to bolster your personal balance sheet. The average refund is usually around $3,000, and most people receive the money within three weeks of filing their returns. That’s a nice chunk of change. Here are 13 good things you could do with the money.
Pay Off Your Credit-Card Debt
- Using your refund to pay off a balance with an 18% interest rate is like earning 18% on your investments — an incredibly valuable use of the money. See Best Ways to Pay Off Every Type of Loan for strategies to help you set decide which debts to tackle first.
Rebuild Your Emergency Fund
It’s a good idea to keep three to six months’ worth of expenses in an emergency fund, so you don’t land in debt or have to raid retirement funds if you have unexpected expenses. If you’ve had to tap the fund over the past few years, payday loans Hamilton Ohio you can use your refund to help build the account back up. Keep the money easily accessible in a money-market account or savings account that earns some interest. See 7 Smart Ways to Build Your Emergency Fund for more information.
Boost Your Retirement Savings
- You can contribute up to $5,500 to a Roth IRA for 2018 (or $6,500 if 50 or older) — and withdraw the money tax-free in retirement. You can contribute the full $5,500 as long as your income falls below $120,000 if you’re single, and $189,000 if married filing a joint tax return. You can make a partial contribution if you earn less than $135,000 if single or $199,000 if married filing jointly.
If you work and your spouse does not, you can also contribute to a Roth IRA in his or her name if your joint income is within those limits. Even if you’ve retired from your main job but are working part-time, you may be able to contribute to a Roth (see Part-Time Workers, Contribute to a Roth IRA). If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth (see How High Earners Can Set Up a Roth IRA).
Fund a Taxable Account
- Use the extra cash to buy shares in a mutual fund or stock you’ve been considering — but may feel is too risky for your IRA or not available in your 401(k) plan. Consider one of our 25 Best Mutual Funds for Low Fees for your portfolio. Before you settle on individual stocks, see The 50 Best Stocks of All Time.
Fill Gaps in Your Insurance
- Liability Insurance. Cover your legal expenses if someone is hurt in your home or by your car. It generally costs just $200 to $400 to buy a personal umbrella policy that provides $1 million in coverage over the limits of your auto- and homeowners-insurance policies. See Protect Your Assets With an Umbrella Insurance Policy for more information.
- Home insurance. Hurricane season starts in June, so it’s a perfect time to use some of your refund money to protect your home. For about $130, you can add $10,000 to $20,000 in sewage backup coverage — which isn’t part of a standard homeowners policy. Consider buying a home generator: A 6.5 kw portable generator costs about $800 to $1,000. An automatic standby generator costs more than your refund (about $4,000 plus $3,500 for installation), but the money you get from Uncle Sam can hep you start saving for one. You also can pay to trim your trees to help protect against some of the most common types of storm damage and put together a disaster kit. See What Your Homeowners Policy Covers.