Submitted by Rachel R on Mon, 02/19/2018 - 8:34am
Put your income tax refund to good use
Image by frankieleon via Flickr
Some North Carolina consumers dread tax time, while others love it because they know it means they’ll get a nice big tax refund check. If you’re getting a refund this year, but you’re also deep in debt, it’s time to carefully consider what to do with your IRS check to make the most significant impact in your financial crisis. Some people see their annual tax windfall as the chance to buy a luxury item like a TV or take a vacation, but that cash might be better spent on peace of mind.
Here’s a look at seven better uses for your 2018 tax refund.
Debt is almost a living thing because it grows if not wiped out and can run rampant quicker than you realize. When you get behind on debt, you rack up late fees, over-limit charges, interest, and more. Taking your tax refund and applying it to settle past-due accounts or make a dent in your highest interest credit cards might be the best strategy to get ahead.
In life, you should expect the unexpected. Accidents happen, job loss can crop up out of the blue, you can get sick or have an appliance fail, or your car blows a gasket. Without an emergency fund, you might have to rack up debt to deal with the crisis. If you don’t have an emergency fund or it isn’t robust, using your tax refund to plump it up can save you from a future financial crisis.
These days, pensions from employers are few and far between, and Social Security isn’t enough to provide what you’ll need in your golden years. If you don’t have an IRA, using your tax refund to get one started might be a solid plan. Some accounts require at least a $1,000 to start an investment account plus a small fee, so when you have the lump sum in hand, it’s a great time to get started.
If a certification or finishing your degree or starting an advanced degree can put you on a path to a higher salary or promotion, that might be the best use of your income tax refund. Perhaps a professional conference would boost your career. Building your skill set or advancing your education is an investment in yourself and can be a boon to your financial future. That’s better than a new TV.
If you commit your tax refund to reducing the principal on a loan, you’ll pay less interest in the long-run and get yourself closer to satisfying the debt. Putting a chunk towards your mortgage might not make a real dent, but if you pay down the principal on an auto loan, furniture loan, or personal loan, you can see significant savings in interest and get yourself closer to extinguishing that debt.
If you have kids and you want them to go to college someday, starting an educational account (or adding to it) might be the way to go with your refund. Devoting your annual tax refund to your children’s education is a sound way to combat future costs. Even if you can’t put a lot away, the interest over time will help, and it’s better than no college account at all.
If your debt situation is so tough that you’re living paycheck to paycheck, dealing with debt collectors, and constantly stressing about bills, your best use of your income tax refund might be to pay for a bankruptcy case to get back on solid financial footing. You might even have enough to finance your bankruptcy and have a little left over to do one of above as well.
North Carolina bankruptcy can be life-changing. You can shed credit card debts, medical bills, years-old tax bills, and other unsecured debt with Chapter 7. If you’re delinquent on your mortgage or auto loan, Chapter 13 can get you on a repayment plan to get current.
To find out if bankruptcy is a fit for your financial predicament, contact the Law Offices of John T. Orcutt. Read reviews from satisfied clients, then call +1-919-646-2654 to schedule a free North Carolina bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.
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