Tax returns? Saving, paying off debts or having fun? | Company


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Erin Green

While the pandemic somehow hit everyone, the average tax refund, estimated at $ 2,873, closely follows what it was last year, according to the IRS.

If you have received a tax refund, what should you do with it? Erin Green has some suggestions.

Green, a senior wealth strategy associate at UBS Wealth Management USA, 300 E. State St., Redlands, outlines five strategies for getting the most out of your tax refund:

1. Debt back: If you constantly have to pay high interest charges on credit card balances and loans, it can become difficult to advance financially. Good use of your tax refund can be to reduce or eliminate your debt. You can pay cards with the highest interest rates first, while making minimal payments to others.

2. Plan for the unexpected: Life is full of unexpected events that can be expensive. Having an emergency fund can help you avoid relying on credit cards to pay for it. If cash is tight and you use credit, you may have to pay interest on the money you borrowed for a long time. You can use your tax refund to start or add to your emergency fund. Ideally, you should have enough in the emergency fund to cover your living expenses for at least three to six months.

3. Saving for Education: Consider using your tax refund to get you started quickly or add it to a school education savings program for your children or grandchildren. Tuition is expensive and is likely to continue to increase.

4. Boost Your Retirement Nest Egg: Every little bit helps when it comes to saving for retirement. One strategy is to withhold less income tax from your wages over the next few years so that you don’t receive a large tax refund. Better yet, increase your contributions to your employer’s retirement plan to save even more.

Have a Little Fun: Depending on the amount of debt you have, you may also want to consider using a small portion – such as 10% or less – of the refund towards a purchase you’ve been looking at and enjoying. will deliver.

One option to consider could be a vacation, but it’s especially important not to go too far.

How about investing in the market? Is it a good time now?

“It’s always a good time to invest,” said Green. “Markets generally tend to get higher over time, and this statistical advantage tends to increase over time.”

When it comes to investing tax refunds in the market, Green recommends investing now, rather than using a simple “lump sum” strategy of investing all at once.

Green’s comments are for educational purposes only and should not be relied on for investment advice or making investment decisions. For more information about USB Financial Services, visit usb.com.

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