Knowledge Center

Use Your Tax Refund Wisely

investing-my-money | Read Time: 3 minutes

By Perry M. Sutton, AIF®, CRC® | Published: March 2021

image

It’s that time of year!

Tax season is quickly approaching and though some may dread having to complete their 2020 returns, many look forward to receiving a refund. This begs the question “what should I do with my refund if I get one?”

Though the first instinct might be to buy that shiny item you’ve had your eye on or take a lavish vacation (who wouldn’t want to get away for a week or two after the year we’ve had?), prudence and intention should be front and center of our decision-making.

Let’s take a closer look at three ways you might consider apportioning your refund.

  1. Building your emergency fund. Paying off debt might be the first thought that comes to mind when you receive a sum of money, but the adage ‘safety first’ applies to finance as well. You should aim to amass six months of essential household bills in a liquid checking/savings/money market account that can be accessed within 24 to 48 hours should an emergency arise. So, if you don’t have enough in your emergency fund, your tax return should go here first.

  2. Paying off revolving credit and debt. If you find that you have enough saved, then you might want to consider paying down revolving credit debt. Many of us use credit cards and they usually come with double-digit interest rates. Pay off the credit cards with the highest interest rate first. Many people want to pay down their mortgage as quickly as possible, even if they have a low interest rate (right now they’re sub-3%). As far as debt goes, I am not referring to mortgages. Focus solely on paying off high interest rate cards and any personal loans.

  3. Investing. If you are new to investing, trying to figure out where to start can seem overwhelming. Also, you may come across information on TV, social media, etc. that seems like a sure bet or something that will make you money fast–resist the urge to jump on board. Your best bet is to open an IRA, Roth IRA or Brokerage account and diversify (spread out) your funds amongst different investments. This is where the help of a financial professional comes in. If you’re not ready to hire someone just yet, there are apps and online brokerage firms that, while they might not be the best for maximizing long term success, are a good place to get started.

Getting a sum of money can be exciting, but it also comes with responsibility–responsibility to yourself for making the right choice. When making decisions about money it’s best to do so as I said before–with prudence and intention.

All too often we make knee-jerk decisions that may not hurt us in the short term but will stifle our longer-term efforts to achieve financial freedom.

Of course, you could always spend your refund, but imagine directing those funds to a more noble cause–your future–and one day looking back and saying “I’m so glad I did” instead of “I wish I would have.”




About the Author – Perry M. Sutton, AIF®, CRC®
Perry M. Sutton, AIF®, CRC® is a Financial Advisor with over 10 years’ experience specializing in advanced financial planning and investment management strategies for high-net worth individuals. He is a 2008 graduate of Seton Hall University with a bachelor’s degree in Accounting and Finance. He can be reached via email at psutton@wsfsinvestments.com.


This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation. The financial advisors of WSFS Wealth Investments offer securities and advisory.

The financial advisors of WSFS Wealth Investments offer securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. WSFS Bank and WSFS Wealth Investments are not registered as a broker-dealer or Registered Investment Adviser. WSFS Bank and Commonwealth are separate and unaffiliated entities. Fixed Insurance products and services are offered through CES Insurance Agency.

Investments are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Funds are subject to investment risks, including possible loss of principal investment.


Market Minute

The markets and the economy are ever-changing, making it hard to keep up sometimes. Let WSFS help you make sense of it all. Tune in to our Market Minute update from Andrew N. Davis, CFA®, Director of Research at West Capital Management, a subsidiary of WSFS Financial Corporation.

Read More

Investing During Life’s Stages

While you would ideally start saving for retirement when you earn your first paycheck, that’s not reality for most Americans. There may be many reasons for being unable to save for retirement, including having experienced financial hardship for a year or more, having to take time off from work to be a caregiver, or having accumulated medical or college debt.

Read More

Advisor Timing: When Should I Hire a Wealth Partner?

Do you like to “dabble” in the stock market? Get a “hot tip” at a cocktail party? Read about a new technology or promising new drug and decide to take a “flyer” on its stock? It may be fun to do this with extra cash you may have, but do you have a long-term investing plan?

Read More

How to Choose the Right Financial Advisor for You

Most Americans believe in managing their own money. While that is ok for some, for others, they may find themselves lost and unprepared for retirement. What often bridges the gap between financial freedom in retirement and those unprepared for life’s financial challenges is an Advisor.

Read More

A Successful Retirement Starts with You

It starts with you. With retirement a mere five to ten years away, many Americans will start to panic thinking (perhaps appropriately) that they are not on track to retire comfortably. In the decade that I have been an advisor, I’ve seen many unique stories that all share a common thread – the desire to live life to its fullest through the choices we make, the things we own and do, and the people most important to us.

Read More