Income tax season is upon us. If you’re expecting a refund this year, it’s always a great idea to have a plan for what you’re going to do with your money. Of course, it’s easy to have the money ‘already spent’ in your mind as the money burns a hole in your pocket, but try not to treat it as a bonus check.
Instead, think of your tax return refund check as if it’s another paycheck. Just like money from your weekly, or monthly paycheck, it has a definite purpose – bills and necessities such as groceries, and so much more – your tax return can have a similar purpose.
There are many things you can do with your return check. We’re going to look at three possibilities: using it to help buy a new home, a new car, and saving it wisely.
Using Your Tax Refund in the Home-Buying Process
If you’re considering buying a new home, one thing you can do with your tax refund is to deposit it into an account solely dedicated to your down payment fund. The more you can put down for your down payment, the less you’ll have to borrow. But the biggest problem for many first-time homeowners is saving for a down payment. That’s why augmenting your down payment with your tax refund can be helpful.
Even putting down a small down payment – i.e., 3% – could be enough to qualify you for a mortgage. In other words, that’s a $3,000 down payment on a $100,000 home. While your refund might not be that much, it can be deposited into your down payment account. Or if you’re thinking of buying in the future, it can be deposited into your down payment account. Continuing to add to the account until you’re ready to buy a home can make a huge difference in how much you’ll need to borrow. It can simply be a matter of priorities. Is it more important to buy a new flat screen TV with your tax refund, or to save for a down payment on the new home you’ve always wanted to buy?
Once you’re ready to begin the home-buying process, your next step is to work with a bank that provides personal attention, a friendly staff, and a complete mortgage loan service, such as the team at Peoples Bank Home Loan Center.
Using Your Tax Return to Buy a New Car
If you’re thinking about using your tax refund to buy a new car, you’re not alone. Studies have shown that one in five American taxpayers will spend their money on something vehicle-related – whether it’s for a down payment on a new or used car, or to make improvements to an existing vehicle. The typical tax refund in the $2,500 to $3,000 range, applied to a down payment, can significantly lower your monthly car payments.
Using Your Tax Refund to Build an Emergency Fund
If you don’t have any significant outstanding debt to deal with, using your tax refund to build up your emergency fund is another good idea. Liquidity – having enough ready cash on hand – is the best way to guard against unexpected financial situations, such as a sudden car repair or home repair bill. Having six to eight months worth of savings in an interest-bearing account, that is easily accessible, can help prevent financial difficulties in your future.
If you’re thinking of using your refund on any of these options, then Peoples Bank of Texas is here to help. Peoples Bank puts people first, and is a true community bank.