Are your clients for advice on how to put their tax refund to good use? Here are ten ideas shared in a slideshow from Kiplinger.com. Do you have any other tips to share? Post your ideas in the comments section!
10 Smart Uses for Your Tax Refund
March 2012
By Kimberly Lankford
1. Pay Off Credit-Card Debt
Any “windfalls” like tax refunds are great to help lower any high interest loans the client may have outstanding.
2. Rebuild Your Emergency Fund
Does your client have adequate emergency funds? If not, earmarking a tax refund to help build or replenish their emergency fund will pay off if the client happens upon an unexpected financial situation.
3. Boost Retirement Savings
Are your clients credit cards all paid off and emergency fund fully funded? Great! Are they eligible to contribute to a Roth IRA? Are they making the maximum contribution? Even if their income is too high to contribute to a Roth IRA, they can still make non-deductible contributions to an IRA and roll it over to a Roth.
4. Fund a Taxable Account
Retirement accounts maxed out? There is always room for taxable savings accounts.
5. Fill Gaps in Your Insurance
Do your clients have liability insurance? How about flood insurance? If not, this is a great area to explore and apply the tax refund amount to cover the insurance premium cost.
6. Build Your College Savings
If your clients are in a financial position to help cover their children’s college cost, help them open or contribute to a 529 account, allowing the refund amount to grow tax-free and possibly adding a state tax deduction for the clients return.
7. Help Your Kid Save
Are your clients interested in facilitating their children’s financial education by teaching them to save a portion of what they earn? How about suggesting the client match their children’s contribution to a Roth IRA and starting to teach them how to invest? They will be glad to learn about saving, investing and be proud have a head start on their peers!
8. Prepay Your Vacation
Do your clients like to get away on vacation? Suggest setting up a separate account and contributing the refund to the vacation fund, and then setup automatic deposits to have the vacation fully funded before they depart. This idea applies well to any upcoming expense items, like new appliances for the house or holiday budgets.
9. Invest in Your Home
Keeping a home in good shape by making repairs and upgrades is another worthy idea for a client looking to put their tax refund to good use.
10. Give to Others
Clients can feel great about increasing their charitable gifts, and get some tax benefits to boot if they are itemizing.
