It’s hard for many Marylanders to feel financially confident right now. Inflation is still running high, the job market is shifting, and credit is tougher to access. In fact, a recent survey from the Federal Reserve Bank of New York found that more Americans expect financial challenges in the year ahead, with rising concerns about unemployment, debt, and household budgets.
That’s why it’s more important than ever to make your tax refund work for you. Instead of treating it as extra spending money, think of it as an opportunity to strengthen your budget, pay down debt, and build the kind of financial security that keeps you on track no matter what the economy throws your way.
Here’s how to make the most of your refund based on your financial goals and life stage.
Young adults: Build financial resilience
Young adults are feeling the pressure of a shifting economy. With wages lagging behind inflation and job security becoming less certain, financial flexibility is key. Don’t treat your tax refund like a bonus. Use it as a tool to build stability and create options for your future.
Future-proof your finances with an emergency fund
If you don’t have an emergency fund, now is the time to start. Even setting aside $500 in a savings account can help prevent financial setbacks. With concerns about layoffs and rising living costs, having a financial cushion means fewer sleepless nights.
Protect yourself from high-interest debt
If you carry a balance on your credit card, you’re paying more in interest than you think. With borrowing costs rising, paying down high-interest debt immediately saves you money. Transferring debt from a high-balance credit card to an account with a lower interest rate saves on payments over time.
Invest in your career growth
The job market is shifting. Fewer people are quitting and some industries are tightening budgets and reducing growth projections. Instead of waiting for a raise (or a layoff), use your return to increase your skills and make yourself more competitive.
- Invest in certifications or training in high-demand fields like IT, project management, or health care.
- Upgrade your tools or software to boost efficiency in your current job.
- Build your network by joining professional groups and attending industry events and professional conferences.
If you’re already job hunting, consider investing in a professional resume or LinkedIn optimization so you stand out.
Families and homeowners: Protect and grow your wealth
Rising prices are impacting everything from groceries to medical care to college tuition, putting extra pressure on already strained family budgets. Your tax refund can help ease that burden and set you up for long-term stability.
Build a bigger emergency fund
With nearly half of households expecting credit to be harder to get, cash reserves are even more essential. Many financial experts now recommend increasing emergency savings beyond the traditional three-to-six months of expenses to a full year’s worth. Why?
- Job disruptions can take longer to recover from
- Medical emergencies can strain finances
- Home and car repairs can come out of nowhere
Even if you’re not able to save a full year’s worth immediately, building toward that goal puts you in a stronger financial position.
Reduce your mortgage or auto loan balance
A single extra mortgage payment per year can take years off your loan term and save you thousands. Even a small extra payment now makes a big difference.
Not sure if this is the best move for you? Consider weighing your loan interest rate against your other financial goals. Check out our new low auto refinance options to see if you qualify.
Cut costs with energy-efficient home upgrades
With energy prices rising, investing in efficiency upgrades can save you money month after month. Plus, Maryland offers tax credits and rebates for energy-efficient home improvements. Check for incentives in your county to stretch your refund further. Consider using your tax refund for:
- Smart thermostats to reduce heating and cooling costs.
- Energy-efficient appliances that reduce electricity usage.
- Roof or window repairs that prevent bigger, more expensive, issues down the line.
Save for your child’s education
Higher education costs continue to climb, and student loan interest rates are high. A 529 college savings plan can:
- Grow tax-free when used for education expenses.
- Lower your state income tax burden in Maryland.
- Give your child a financial head start and reduce future reliance on student loans.
Pre-retirees and retirees: Protect your financial freedom
Many retirees are worried about rising health care costs, inflation, and market uncertainty. Your tax refund can help secure your retirement years and give you peace of mind.
Max out your retirement contributions
If you haven’t maxed out your 401(k) or IRA contributions, your refund can help you close the gap.
- If you’re 50 or older, take advantage of catch-up contributions to boost savings before retirement.
- If you’ve already retired, consider shifting savings into lower-risk investment options.
Pay off outstanding debt
Entering retirement with debt can strain your fixed income. Consider using your refund to:
- Eliminate lingering loans like credit card balances or car payments.
- Make an extra mortgage payment to bring you closer to living debt-free.
Prepare for health care costs
Medical expenses often rise in retirement, and long-term care can be one of the biggest financial burdens. Use your tax refund to:
- Contribute to a Health Savings Account (HSA) to cover future medical expenses tax-free.
- Explore long-term care insurance to help with future medical or assisted living costs.
- Set aside a health care fund for out-of-pocket expenses like dental work or new eyeglasses.
Make the most of your tax refund with SECU
Using your tax refund wisely isn’t about missing out. It’s about creating financial stability and opportunities for the future. With uncertainty in the economy, a smart strategy today can help you navigate whatever comes next with confidence.
At SECU, we’re here to help you make the best financial decisions for your situation. Schedule a free financial wellness checkup to get personalized guidance on:
- Managing debt wisely.
- Building a strong savings plan.
- Planning for major life expenses.
Schedule your financial wellness checkup today.
