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What is the Best Way to Spend My Tax Refund?

Lynnette Khalfani-Cox, The Money Coach by Lynnette Khalfani-Cox, The Money Coach
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Q: I want to use my tax refund money wisely this year so I can build a strong foundation for me and my two little girls. I have not been very smart with my past money choices. How can I make my money work for me this time?

A: Congratulations for wanting to improve not only your own financial circumstances, but also that of your two daughters.

You did not state how large a tax refund you expect to receive, but I do know that the IRS says the average tax refund doled out is about $3,000.

Here are three suggestions on how to manage your refund check wisely. First, set aside 25% of your refund for savings. Put the money into an emergency fund that you don’t touch. Keep that money as a cash cushion, and slowly add money to it, little by little each month.

Next, use 25% of the money to pay off credit card debt or any consumer debt you may owe.

Lastly, use the final 50% of your refund check to save for your daughters’ future college education. Take the money and open a 529 plan for each child. A 529 plan is a state-sponsored college savings plan with great tax benefits.

If you take these steps, you’ll be empowering yourself and your family, and you’ll know beyond a doubt that you managed that income tax return wisely.

Tags: income tax refund checktax refund
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About

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, speaker, and author of 15 money-management books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom.

Lynnette has been seen on more than 1,000 TV segments nationwide, including television appearances on Oprah, Dr. Phil, The Dr. Oz Show, The Steve Harvey Show, Good Morning America, The TODAY Show and many more.

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