Suze Orman: 5 Best Ways To Use Your Tax Refund
The IRS is sending out tax refunds to eligible taxpayers and financial guru Suze Orman has a few ideas on how to use them.
She outlined some of the best ways to use a federal tax refund in a recent blog post. There’s something for everyone in Orman’s list, whether you need flexibility with your budget or want to invest in long-term assets.
Read More: What Americans Do With Their Tax Refunds
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Keep Up With Living Expenses
Groceries and gas have gotten a lot more expensive in recent months and a tax refund can provide a financial cushion to navigate those expenses. Orman warned against making splurge purchases if you use the money for this purpose.
A tax refund can create some space in a tight budget. However, if you use it for snacks and non-essential items, you can quickly lose the advantages of a tax refund.
Car Maintenance
Maintaining your car is one of the best investments you can make. Orman cited “crazy expensive” car prices and rising auto loan interest rates as reasons to keep your current car for as long as possible. Spending money on car maintenance and replacing old parts can keep your car on the road longer and save you plenty of money in the long run.
Build Your Emergency Savings Account
An emergency savings account is a vital resource that helps people navigate living expenses in the event of job loss, a surprise expense or some other reason. Expenses don’t always abide by monthly budgets and an emergency fund that can cover six to 12 months of living expenses can provide enough coverage for a while.
A tax refund gives you the opportunity to start or replenish this account. It can provide some breathing room for emergency costs in the future and reduce financial stress. As a bonus, you can put the money into a high-yield savings account to compound your balance faster.
Set Aside Money for Health Insurance
Older taxpayers should create a separate bank account for out-of-pocket health insurance costs. It serves as an extra financial cushion on top of an emergency savings account. A tax refund can give this account a quick boost or a good starting point. Once you have enough money saved for maximum out-of-pocket costs, you can focus on other accounts.
Contribute to Your Roth IRA
Orman’s last suggestion is to use your tax refund to contribute to a Roth IRA. This option works well for people who are early in their careers and want tax-free withdrawals when they retire. You should only contribute to a Roth IRA if you can keep up with monthly expenses. That way, you won’t have to withdraw from a Roth IRA early.
Per the IRS, the maximum contribution for this account is $7,500 per year in 2026. There is also a $1,100 catch-up contribution available for people who are 50 years or older.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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