How to make the most of your money with tax returns, third stimulus checks
BATON ROUGE, La. (WAFB) - As tax returns have rolled in after the third round of stimulus checks that most of you have already got. Some are still waiting for that refund or that stimulus aid. Experts said our first instinct when we get a lump sum like this is to splurge, but there are ways to make that money last.
A local financial professional said most Americans plan to either save their $1,400 stimulus check or use it to pay down debt. Around 25% said they plan to spend it. Similarly, nearly half of Americans plan to save their tax refund.
Experts said if you need the money for groceries, rent or mortgage, prioritize the essentials first by re-evaluating your budget. Make a list of your bills and check to figure out what needs to be paid first and what can be paid later.
So, what should we do with our stimulus check or tax refund if our basic expenses are covered?
You can create an emergency fund. Experts are seeing this now more than ever.
Most Americans believe they should have $10,000 or more in emergency savings. More than half say they have $3,000 or less.
Your emergency fund should have enough money to cover three to six months of expenses if you lose your job, miss a paycheck or have an unexpected medical bill.
When families don’t have money to navigate these unexpected expenses, they might have to borrow money, potentially leading to a cycle of debt.
“First off, paying that debt is great,” said Ernie Burns with Burns Estate Planning & Wealth Advisors. “A lot of people lean on their credit cards last year after the pandemic, and they got laid off or furloughed or whatever it might have been. Now, if you can basically start the avalanche effect, pay off that highest credit card first. If it’s 16.6% interest, lean on that one first.”
He said while it might be hard to make debt payments on top of your other bills, you need to stay on top of high-interest debt, like credit card debt.
Burns said your stimulus check could give you a great opportunity to open a Roth IRA.
A Roth IRA is a retirement savings tool where you pay taxes on the money before it goes in, and your withdrawals are tax-free in retirement.
If you need help with your investments, this is also a great time to meet with a financial professional. They can help you set savings goals for retirement and create a plan to reach them.
They’ll also show you what the next 10 to 15 years will look like in terms of income and expenses by making a roadmap. You can also start by helping the community.
“If you can help the local community, local stations around the area, some local restaurants just by spending money in these local restaurants,” said Burns. “Maybe you’ve been cooped up, maybe you’re a little older, and you’d have some heath ailments or both, and you haven’t gotten out. After you have those two shots and it’s been those two weeks, now you can go out.”
He said to use the money to order takeout from a local restaurant or support your favorite local business. Food banks and other charities are also seeing an increase in demand for services. If you have a job and an emergency fund, consider helping those less fortunate.
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