What Should I Do With My Tax Refund?

Many of our divorce clients continue to work with us even after their divorce is final.  At this time of year we often hear from clients who are expecting tax refunds.  Their big question: What should I do with my refund?

While everyone’s situation is different, here are a few ideas to make good use of your tax refund.A basic, but often overlooked, account that everyone should have is an emergency savings account.  In an era when so many people are living paycheck to paycheck, a sudden cash emergency can be devastating.  We recommend that our clients keep at least 3-6 months’ worth of living expenses in a guaranteed, accessible savings or money market account.  Don't worry about low interest rates- the money is there for safety, not to make big returns. 

Once you have an adequate emergency fund, look to pay down any "bad debt" that you may have.  Mortgages are fine, but start with the highest interest credit card, student loan or car loan and add your tax refund to that.  If you don't have any of those, consider adding your refund to a Roth IRA.  You don't get a tax deduction, but all future qualified withdrawals are 100% tax-free.  In all likelihood, taxes are going up in the future, not down, so why not start adding to an account that will guarantee tax-free retirement income?

More information about Senes & Chwalek Financial Advisors can be found at www.senesandchwalek.com.  Senes & Chwalek Financial Advisors has offices in Concord and Harvard, Massachusetts.  Views and opinions expressed are those of Renee W. Senes and David Chwalek and are subject to change based on market and other conditions.  The information provided is general in nature and should not be construed as tax or investment advice. Consult your investment professional regarding your unique situation.

Renee W. Senes and David Chwalek are Registered Representatives and offer securities through Investors Capital Corporation, Member FINRA, SIPC

Advisory Services are offered through Investors Capital Advisory Services, 6 Kimball Lane, Lynnfield, MA  01940  (800) 949-1422