Expecting a refund this year? Before you invest in the boxed set of Game of Thrones DVDs or a smart watch, consider these tips from the American Bankers Association.
According to the Internal Revenue Service,the nation’s taxpayers received an average tax refund of nearly $3,000 in 2015. This year, with more than 70 percent of taxpayers receiving a refund, our friends at the American Bankers Association are highlighting five tips to help you make the most out of your windfall (alas, buying a new big screen TV isn't one of these!):
- Save for emergencies. Open or add to a high-yield savings account that serves as an “emergency fund.” Ideally, it should hold about three-to-six months of living expenses in case of sudden financial hardships like losing your job or having to replace your car. Try this calculator to see the impact of saving more--it can be a game changer!
- Pay off debt. Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.
- Save for retirement. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. Where can you get one? Your bank can help set up an IRA, while a 401(k) is employer-sponsored.
- Put it toward a down payment. The biggest challenge that most first-time home buyers face is coming up with enough money for a down payment. If you intend to buy a new home in the near future, putting your tax refund toward the down payment is a smart move. Use this calculator to see how much your mortgage payments will be based on your down payment and other factors.
- Invest in your current home. Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home. This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term. If you have more substantial renovations in mind, your bank can help with a home equity line of credit.
Can't decide what's the best use of your tax refund? Stop by a Bank Independent office today and talk to one of our Relationship Bankers. They'll take the time to walk through your options with you. If opening a new deposit account is the answer, you can also do that online. And if a new home is in your future, visit www.bibank.com/MORE to check out our limited-time mortgage offer and apply online!