What You Can Do With Your Tax Refund

Are you wondering what you can do with your tax refund?

Above all, pausing and saving is the best thing you can do when receiving a tax refund. Also, setting your money aside and determining the best place for it will help ensure you have it when needed. Besides, it allows you to avoid spending it on things you don’t need and financial regrets.

Your Individualized Financial Plan

Now is one of the best times to get advice from your financial advisor and review your financial plan. No matter the size of your tax return, consider all the possibilities of what you can do with your tax refund.

Partner with a fiduciary advisor, and take these three vital steps to plan your finances with an expert prioritizing you.

Saving in and of itself can help you build a solid financial foundation. And indeed, with a stronger foundation, you can better control your finances, having money available when you need it mos

Placing Your Tax Refund In A High-Yield Account & The Next Best Steps

So, what can you do with your tax refund when you receive it? Here are some tips:

1. Open A FDIC-Insured High Yield Savings Account

A FDIC-insured high-yield savings account is a bank account that allows you to earn more interest than most bank accounts. These accounts allow your money to grow over time, keeping the money pretty liquid, and are not subject to market volatility.

Whether or not clients express concerns about moving their money, recent bank failures are top of mind for everyone. Although my clients have yet to express this concern, this is a great time to reach out to clients and discuss the importance of where your clients keep their cash. Often money is making less than 1% interest, yet high-yielding saving accounts yield upwards of 4%. While discussing the best place for their money, besides considering investing it, earning more interest, or eliminating debt, I mention FDIC coverage rather than wonder if they are concerned about it. I explain that depositing their money in an account with an FDIC-insured bank provides automatic deposit insurance coverage for up to $250,000, protecting it in the event of bank failure. Higher net-worth clients with trust accounts will also appreciate conversations about the impact of the FDIC’s new deposit regulations amendment effective April 1, 2024.

Alissa Krasner Maizes, Founder of Amplify My Wealth
Think Advisor, 11 Tips for Helping Clients Worried About Their Cash: Advisors’ Advice By Dinah Wisenberg Brin, April 2, 2023

2. Goalsetting And Your Money

While pausing, your money can grow in your high-yield savings account, and you can set your goals and assign a dollar amount to each goal.

Maybe you want to

• get rid of credit card debt,
•  save money for a home,
•  fund an emergency fund,
•  save for a new phone, a trip, or college.

Ensure each goal aligns with your values and set attainable steps to get there.

Grab The Ultimate FREE Goalsetting Tools: Amplify My Wealth Guide To Living The Life You Want & Access The Calculator Too!

3. Automate Savings For Your Goals

Automating regular transfers into high-yield savings accounts for each goal will help you reach your goals sooner. Consider all your goals together. Your time horizon to attain your goals may overlap, and take a little tweaking to get it right. Then, once your individualized financial plan is complete, set up your automated transfers. Regular automation whenever you get paid or once every month likely makes the most sense. By making saving a habit, you’ll be more likely to stick with it and reach your goals.

Celebrate all your financial wins! Saving your tax refund is an empowering, financially responsible thing, building a solid financial foundation for your future.

Your Next Best Financial Moves With Your Tax Refund

There are many things you can do with your tax refund. Here are a few options:

1. Save it: Saving your tax refund in a high-yield savings account is great for emergencies or short-term goals. Besides, having cash available be beneficial if you don’t have an emergency fund or other savings.
2.  Pay off debt: Eliminating high-interest credit cards and student loan debt positively impacts your net worth and financial stress level.
3.  Invest it: Investing your tax refund can be an intelligent way to grow your money over time. Researching and choosing investments that align with your goals and risk tolerance is essential. A fiduciary financial advisor can provide expert advice and an individualized financial plan. Your plan with a diversified investment portfolio aligning with your goals should help you reach them too.
4.  Make An Intentional Splurge: First, determine the best use of your money. If it aligns with your plan, an intentional splurge with some or all of your tax refund can be great. Sometimes your purposeful splurge can save you money over time and bring you joy. An example of an intentional splurge can be upgrading your coffee pot and getting your favorite coffee. If your splurge is something that you can afford and not derail your financial future go for it. Now, you can always treat yourself to your favorite barista-made coffee, even in the comfort of your home.

Of course, you should celebrate when you receive your tax refund. However, pausing and determining the best for you can result in an even “bigger celebration.” Instead, the best thing for you depends on your finances, values, goals, and the life you want. No matter what, empowering yourself with your finances will give you a return on investment of greater financial confidence and choices.

Please share in the comments what you would do if you got a tax refund. Follow on Instagram & Subscribe to The Newsletter for more tips & free resources too!