At $3,120, the average tax refund is quite a chunk of change. You could use your tax refund to buy a bigger television (or three), go on a vacation, upgrade your wardrobe, or buy any number of other knickknacks. How long will a new gadget last, though? And will buying something that will break, fade, or go out of style help you build your best financial future? We're not convinced. Get ideas for what to do with your tax refund from U.S. Money Reserve, America's Gold Authority® and the only gold company led by a former United States Mint Director. Make this the year you secure your strongest financial future!
4 Ideas for What to Do with Your Tax Refund
1. Build your emergency savings.
More than half of Americans (57 percent) have less than $1,000 in their savings account, reports a 2017 GOBankingRates survey. If you receive a tax refund that's anywhere close to the national average and you deposit it into your savings account, you're doing better than many others in America!
Having an adequate amount of savings (typically six to eight months of expenses) is one of the best ways to prepare for life's uncertainties, advises U.S. Money Reserve CEO Angela Koch in Austin Woman Magazine. Without a sufficient amount of savings, you could find yourself relying on credit and sinking into debt—two things that won't get you closer to your best financial future.
2. Pay off debt.
Let's say you are part of the 43 percent of Americans who have at least $1,000 or more saved. Or, you may be part of the 25 percent who have $10,000 or more in savings (another finding from GOBankingRates). If so, congratulations!
Are you in an equally good place when it comes to debt?
Americans' total credit card debt climbed to an estimated $931 billion in 2017—a nearly 7 percent increase from the previous year, reports NerdWallet. Combine mortgages, auto loans, student loans, and other debts, and U.S. consumers are $13.15 trillion in the hole.
What to do with your tax refund can become pretty obvious if you have debt to pay off, especially if that debt carries a high interest rate.
“It doesn't make much financial sense to put the IRS check for $3,000 in a fund yielding 1 percent interest and maintain a $3,000 balance on a credit card account charging 18 percent interest,” says TurboTax.
Making extra mortgage payments can also be a great way to save more over the long term. “Because so much of your payment on a long-term note goes to pay off the interest, reducing the principal can have an exponential effect over the life of the loan,” adds TurboTax.
3. Review and boost your retirement savings.
“Nearly half of families have no retirement account savings at all,” the Economic Policy Institute reports, even in savings vehicles such as IRAs and 401(k)s.
Funding your retirement is a money-smart way to use your tax refund and doing so can help put you ahead of at least half the population.
“A solid nest egg is a crucial source of future income,” advises U.S. Money Reserve CEO Angie Koch, and tax time can act as a yearly reminder to evaluate your retirement fund. Does your mix of stocks, bonds, mutual funds, precious metals, and other financial holdings match your age and retirement goals? If not, take steps to readjust.
You can do so a number of ways. You could contribute to an existing retirement account, open a new or different type of retirement account, or re-balance your current asset mix. (The latter of which is pretty simple to do when you have a Self-Directed IRA since you're in charge of the asset mix.)
Avoid the temptation to spend your refund with IRS form 8888. This form allows you to directly deposit part or all of your tax refund into two or three different accounts including a traditional IRA, Roth IRA, SEP-IRA, or myRA, says U.S. News & World Report.
Note that deposits received after April 17, 2018 are automatically applied to tax year 2018.
Learn more about both traditional and Roth IRAs with a free Precious Metals IRA Information Kit, courtesy of U.S. Money Reserve's Gold Standard Precious Metals IRA program. Sign up to see how precious metals can help set you up with a stronger, more secure retirement.
4. Build generational wealth.
Generational wealth—also called family wealth or multigenerational wealth—is a financial planning concept that's geared toward passing down stable, significant financial resources to future generations.
The road to generational wealth looks different for every family. For some, it may mean owning a group of rental properties or buying fine art. For others, it could mean holding physical gold and silver in coins or bars.
Some U.S. coins, especially certified proof coins in high grades, are only available in limited quantities. Such U.S. coins can create “an environment for excitement where opportunities to purchase these items may only occur once in a lifetime. Ultimately, availability becomes more important than price. This puts a [buyer] with holding power in a very powerful position not only to preserve principal, but also to profit based on the principles of supply and demand,” says Michael Contursi, executive vice president of RCW Financial via Inc.
Whether in bar or coin form, physical gold has “always been a place for the wealthy to store their money,” writes Inc. Gold can act as a portfolio diversifier, store of wealth, and safe haven.
At $3,120, the average tax refund is the perfect amount of money to start building generational wealth and expanding your precious metals holdings. Gold prices in 2018 could hit $1,500 an ounce, with silver prices headed toward $20 an ounce. If you're wondering what to do with your tax refund, do something that will help protect what you've earned and saved through the years. Consider using your tax refund to buy physical gold and silver.
“Never make big financial moves without consulting the right experts first.”
Whatever you choose to do with your tax refund this year, “never make big financial moves without consulting the right experts first,” says Koch. You may need to consult your tax preparer, financial advisor, or other family members.
For gold and silver coins, bars, and bullion, turn to U.S. Money Reserve. We're America's Gold Authority® and the only gold company led by a former U.S. Mint Director. Our Account Executives understand that everyone's financial future is unique, along with their family goals and portfolio. Let us help you see how precious metals ownership could fit into your future. Call 1-844-307-1589 for a free, personalized one-on-one consultation today.