Empower Blog

February 14, 2023

Making the Most of Your Tax Return

Financial Planning, Savings

With tax return season around the corner, several businesses are vying for your tax return money and enticing you with incentives for purchases you may not usually make. In many cases, you may find yourself with a larger sum of money than you typically have at one time, and it’s important to consider ways to use your money effectively.


As you begin to consider how to spend your tax return this year, below are eight smart ways you can put your money to good use.

Invest in Yourself

While treating yourself to new clothes or material things may be tempting, now is a good time to invest in your skillset or education that provides ongoing returns. With the “Great Resignation” many people are looking for a new job or even a complete career change. Investing in professional certifications or classes to enhance your subject knowledge could drive future growth in your position or guide you on a path to a new career. You may also consider investing in services such as a resume writer or purchasing LinkedIn Premium to look for new employment opportunities.

Enhance your Emergency Fund or Pay Off High-Interest Debt

Starting or adding to your emergency fund can provide a safety net for life’s unexpected expenses. Having funds available can prevent you from having to borrow money or open a credit card to pay for sudden or unavoidable costs. Paying off high-interest debt saves you money, can increase your credit score, and provides more cash in your monthly budget you can apply to other savings accounts or investment opportunities. 

Invest in Your Children’s Future

Higher education is a significant expense. By investing in a 529 or Uniform Transfer to Minor (UTMA) account, you can set your child up for a future of less financial stress. Earnings from 529 plans are not subject to federal tax and generally not subject to state tax when used for qualified education expenses. Contributions to a 529 plan, however, are typically not tax deductible. There are plenty of resources for additional information on this, such as the IRS. By investing in an UTMA, you can contribute up to a certain amount of cash each year, free of gift-tax consequences. This can include cash, real estate, or other inheritances. Our Wealth Advisors can help you decide what kind of savings would serve you and your family best.

Save For Near Term Goals

These are the events or items you are planning for in the next 12-18 months. Are you planning on adding a child to your family, paying for a wedding, or saving for a down payment on a house? All of these are thoughtful ways to use your tax return money.

Save for Retirement

Retirement may seem far away for many people; however, the planning starts decades before leaving the workforce. You can consider opening a traditional or Roth IRA that could assist you with your retirement goals. Both are good options and have their own considerations for investing in your future self, even if it is a small amount at first.

Consider Life Insurance and Long-Term Care

Protecting your family through long-term and short-term disability may not have the appeal of other kinds of investments. Still, they are essential in relieving financial burdens if encountering life’s most cruel or unexpected events. Learn more about life insurance and who needs it on our Empower Blog.

Invest In Your Well-Being

The last two years have not been easy. There is wisdom in using your tax return money to invest in your mental and physical well-being. Ways to invest in your health may include joining a gym, getting dinner with friends, or taking a trip to reconnect with loved ones. Balance is key when investing your money, and there are several ways to diversify your investments; it does not have to be all or nothing.


Apply Your Refund to Next Quarter’s Tax Payment

This is something to consider for small business owners. Other options may be prepaying upcoming expenses for the year, such as software services, insurance plans, and IT services. Prepaying these expenses can result in cost savings in addition to minimizing your taxable net income for the year.

Everyone’s personal savings goals are unique. If you need assistance getting on the right track or digging deeper into your own financial planning, visit one of our branches to talk with a Wealth Advisor today.

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About the Author
CommunityAmerica Author
Rina Mehta

Wealth Management by CommunityAmerica

Helping individuals and families succeed in their financial planning goals is my number one goal. I want to deliver personalized financial planning to work through every stage of life whether that’s saving for retirement, working through a loss of a loved one, income planning, or planning to buy a home. Ideally, I hope I help you to sleep better at night without the stress of your financial future.

“I view you as the CEO and I’m the CFO. I want to accomplish your financial goals like it’s your own business.”

Neither Wealth Management by CommunityAmerica nor its financial advisors provide tax advice. For tax advice, please speak with a qualified tax professional.

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