With the end of January comes the beginning of tax season as employers must mail out all of their tax documentation to their employees. By mid-February, you should have everything you need to begin filing your income tax return. If you are like most – it is estimated that eight out of every ten filers receive a refund – you will be receiving a check from Uncle Sam as he pays you back for the tax that you overpaid in 2014. But, what should you do with that money? Here are a few suggestions.
Start An Emergency Fund
It is recommended that a household have six months of savings in case of a financial emergency. If the breadwinner loses or changes jobs, an emergency fund allows the family to continue to pay its bills while in between employment. If the person is eligible to collect unemployment, the emergency fund can help offset the amount of unemployment compensation. A nice chunk of this emergency fund could be taken care of with your tax return.
Pay Off Debt
It is said that the average household has at least $15,000 worth of credit card debt. That does not include car payments or mortgages. If you have high interest credit cards, use your tax refund to pay them off. If you cannot pay them off, choose the cards with the highest interest rates to pay down the balance first.
Start Saving For Your Child’s Education
You can open a simple savings account or you can find out if your state has a special education savings plan. Either way, you can begin saving for the cost of sending your children to college. The average annual cost at a four-year school is well into the five figures. If you do not start saving soon, you and your children may have a hard time trying to find the funds to go to college in the future.
Pay Off Your Car Title Loan
The car title loan that you took out at the end of the year to help cover emergency expenses needs to be paid off. Companies like Embassy Loans of Florida help thousands of people each year by helping them access cash using their vehicles as collateral. When taking out a car title loan, you should always have a plan for paying it off. Your income tax refund will come in handy and help you pay off the balance of your loan.