Texas Living

Maximize your Tax Refund

By James Mayfield 2.14.14

That long-awaited tax refund just landed in your checking account. Now what? Here’s what financial experts recommend.

  1. Start — or jumpstart — an emergency savings fund (many of which were depleted in recent years). Bolster your six- to eight-month stash in an easy-access interest bearing account.
  2. Pay down credit cards or adjustable-rate loans. Start with accounts bearing the highest interest rates. (Think twice about making that extra mortgage payment. Considering the low interest rates in recent years, your money may be better spent elsewhere.)
  3. Boost retirement savings by contributing to a Roth IRA, which lets you withdraw funds tax-free in retirement. If you earn too much to qualify, contribute to a traditional IRA, then convert it to a Roth.
  4. Buy shares in that no-load mutual fund or stock you’ve been considering — you know, the one not included in your company’s 401(k) plan. Do your research online using reputable sources first.
  5. Invest in yourself or your family. Enroll your children in a 529 college savings plan or take a few courses yourself.

All of the above already checked off your list? Splurge, but be reasonable: That $1,500 refund may cover a weekend getaway, not a weeklong cruise to the Bahamas.

In the meantime, don’t let the cash linger in your checking account where it may disappear in sea of lattes or impulse buys. Stash your cash in a high-yield savings account. Weighing the pros and cons of each option will give you a clear picture of your financial situation.