(WJBK) - Today is tax filing day and many people are expecting a refund. Many people, also, will feel like they want to have a good time with it. The average tax refund last year was just less than $3,000 - about the same amount expected for returns being filed now.
Kristen Holt, president and CEO for GreenPath Financial Wellness, joins us on The Nine for this Money Monday segment to talk about some options to handle your tax return, which you can find below. If you'd like more information from GreenPath Financial Wellness, visit www.greenpath.org.
Tax Refund Towards Emergency Fund
There's no better time than tax season to think about getting some money saved for emergencies. Think about saving some or all of your return for unexpected needs you may face. Having a cushion saved to handle those surprises is a necessity. Financial emergencies do happen and being prepared for them will help you sleep a lot better.
Tax Refund Towards Paying Off Debt
Another good idea for your tax refund is to use it to help reduce debt. Getting out from high-interest debt is always a great idea. Paying off a debt or two will reduce your monthly payments, which is another great way to balance your budget. If you're able to pay something off, take the money that was being used to repay that debt and put it in your savings account for emergencies or other family goals such as a down-payment on a house, a new car, or a vacation.
The Thirds Rule
Another good idea for a larger tax refund might be to save a third of it, pay a third to debt, and spend the remaining third. That way you can make progress on several financial fronts.
Finally, some planning for next year's tax season probably should be considered. If you're receiving a $3,000 refund, you might be withholding more than necessary for taxes. There's a withholding calculator on the IRS website, www.irs.gov, that will help you see if you can comfortably adjust your withholding.
If you prefer to receive that former $3,000 tax refund throughout the year, that might calculate into a monthly pay increase of more than $200 per month, which might be very helpful, indeed!