FOR BREAKING NEWS VISIT WWW.QNS.COM APRIL 4, 2019 • THE QUEENS COURIER 21
tax guide
Uncle Sam gave you a refund? Make these smart money moves
While fi ling your taxes can be tedious,
many Americans oft en look forward to
receiving a tax refund. But it’s important
to remember that if you’re receiving
money back from Uncle Sam, it’s because
you had too much withheld and overpaid
your taxes last year - it’s not really extra
money. So before splurging on a dinner
out or a weekend getaway, consider these
steps to put your tax refund to work this
year, setting yourself and your family up
for long-term fi nancial success.
1) Pay down your “bad” debt.
Eliminating your debt, especially the
high-interest consumer debt with no
tax benefi ts, makes it easier to reach
your fi nancial goals. If you’re carrying
a balance on your credit cards or other
high-interest loans, use your tax refund to
pay down these expensive debts.
If you’re still not down to zero aft er you
use your tax refund, continue to make this
a high priority in 2019. When it comes
to smart money management, the only
thing more important is contributing to
your company’s retirement plan at least
enough to receive the maximum employer
match. Oft en, those contributions are
taken straight from your paycheck before
your taxes are deducted. Whether your
employer matches 50 percent of your
contribution or dollar-for-dollar up to a
certain amount, it’s hard to beat that kind
of return, even in a bull market.
2) Build up an emergency fund.
Unexpected situations happen frequently,
but most Americans are unprepared.
Schwab’s 2018 Modern Wealth survey
found just 35 percent of Americans have
an emergency fund. It’s best to tuck away
between three to six months of essential
living expenses in a savings or money
market account. Your money won’t grow
much in these types of vehicles, but it
will be easily accessible when you need
to pay bills in case of a job loss or unexpected
illness. Having some cash ready
for unexpected situations will
help you avoid expensive and
unwise alternatives like living
off credit cards, being forced
to sell investments at an inopportune
time, or withdrawing
money from a retirement
savings account, which oft en
results in having to pay early
withdrawal penalties.
3) Max out your retirement
accounts. Even if you
have a 401(k), an Individual
Retirement Account (IRA) can
be a great way to supplement
your retirement savings. Try to
contribute up to the IRS maximum,
which is $6,000 in 2019,
plus an extra $1,000 if you’re
over the age of 50.
For most people, the above
steps should be taken in order. If you
still have more refund to put to work (or
took these steps before you even got your
refund!), here’s how to think about saving
for other common goals. Th e exact
order of these might vary depending on
your situation:
4) Consider other tax-effi cient saving
and investing accounts: If you’re trying to
save for college for your kids, contribute
to a 529 college savings plan or education
savings account, which both benefi t from
tax-deferred growth on your investments.
You could also contribute to a health savings
account (HSA), which is tax-advantaged
savings and investment account
available to people with high-deductible
health plans.
5) Save for a down payment or pay
down your mortgage. Alternatively, you
may consider saving for the down payment
on your home or making an extra
payment or two on your mortgage or student
loans. While those are considered to
be in the “good” debt category since they
are tax deductible and can help boost
your credit score, eliminating your debt
ultimately helps free up future money for
other uses.
6) Treat yourself or keep investing for
something bigger. Once you’ve addressed
your savings goals, you may consider if
there’s any left to treat yourself and your
family. But make it something you really
want, or if you’re still working toward
a bigger goal, keep saving or investing for
the long-term.
While these steps are especially important
when you’re trying to prioritize how
to save and invest, they’re applicable to
much more than just your tax refund.
Smart saving and investing behaviors are
key to helping you reach your long-term
fi nancial goals.
For help creating or updating a fi nancial
plan, visit a Charles Schwab branch.
Courtesy BPT
Call Now & End Your Tax Nightmare!
Co-Author of the
best selling book
“Breaking the Tax Code”
Salvatore P. Candela, EA, ATA, ABA
Enrolled Agent - Tax Advisor
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