Have you received a tax refund this year? According to the Internal Revenue Service, more than 70% of taxpayers are expected to get a refund, so what are you planning to do with your windfall?  

Whether you’re receiving a large chunk of money or just a few dollars everyone has the option to save either a portion or all of it. By choosing to save you'll ensure your money is stretched to the fullest potential. Below are five guaranteed strategies to stretch your tax refund this year: 

1. Build Your Rainy Day Fund 


First things first, if you talk to any financial advisor they're going to ask, do you have an emergency fund? If the answer is no, then this is the perfect place to start. Before working towards an emergency fund, let's clear up any misconceptions about what it is. An emergency fund is an account set aside in the event of a personal financial dilemma, like the loss of a job, a long-term sickness, or an unavoidable major expense. An emergency fund is different from your retirement fund or a normal savings account you might use for specific goals, and you'll want at least three to six months’ worth of necessary expenses stashed away. According to the Pew Charitable Trusts analysis, on average a medium-sized family's most expensive surprise purchase over the course of a year usually costs around $2,000. That's why having your fund built and ready to go when something unexpected occurs can have a huge, positive impact on your finances.

2. Pay Down Debt


There’s nothing worse for your wallet than dragging along debt and whether it’s high-interest rate credit cards or loans, you definitely don't want to ignore them. In fact, large sums of debt can cause all sorts of problems, like a lower credit score, mortgage loan application denial, or even relationship issues. SunTrust Bank surveyed couples and among those with relationship stress, nearly 44% said money was the core cause of the problem. Making the choice to pay down debt now is a sure-fire way to positively benefit your financial life and otherwise. 

3. Save for Retirement


Another savings option to consider is investing in your retirement fund. This is a perfect place to save that refund, especially if your employer matches a portion of your contributions and you're not already maxing out the full contribution match. If you are you won't receive any added benefits to saving it here, besides having saved more. You also have the option of opening a separate Roth IRA and if you want multiple accounts. You're able to contribute up to $5,500 to a Roth IRA ($6,500 if your 50 and Up) and you can withdraw that money tax-free when entering retirement. 

4. Open High-Interest Rates Account


Your basic savings account is probably the first place most of us think to deposit our refund, but there may be a better option: a high-interest rate savings account. They pay a significantly higher rate of interest, allowing you to rack up extra savings quicker. However, there are some catches to high-interest rate accounts: You may have to maintain a certain minimum balance or use your debit or credit card a specific number of times each month. This won't be the perfect option for everyone's financial picture so before opening an account, you'll want to research which type will best fit your finances. 

5. Invest in the Market


You don't have to be a financial expert to start investing in stocks, nowadays investing apps like Acorns or Wealthfront make building an investment portfolio easy with just a few simple clicks. They can be a helpful tool to help stretch your money and get a jumpstart in the marketplace. To decide which app fits your needs ask yourself two questions: How much do I want to spend and where do I want to allocate it?  
If you don't want to spend a lot, an extremely affordable option is Acorns, starting at $1 a month for accounts under $5,000, it will automatically invest your assets through a computer-designated portfolio, meaning all the investment decisions are made for you. Acorns can also link to your bank account and after a purchase, it'll round up to the nearest dollar and invest the spare change. For example, if you spend $3.50 on a coffee then $.50 would be added to your investment portfolio. Similar to the computer-managed investing of Acorns, Wealthfront delivers the same hands-off approach, but with this app, you complete a questionnaire first and it'll determine which portfolios best match your risk tolerance. Wealthfront requires a minimum $500 deposit and if your balance remains less than $10,000 you can invest for free. Regardless of which app you choose they all come with a level of risk and dependent on the company, industry, and geographic location the risk factor on stocks will change. 

Choosing to save, rather than spend your tax refund should be a no-brainer, and with these options, the choice becomes much easier. 

 

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