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Smart Money Moves for April

Banking, Banking Basics
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With the season’s signs of renewal and growth all around, you might be inspired to spend this month renewing good money habits and growing your bank balances. Consider these four tips for springing forward with your finances.

1. Stash money in a retirement account

If you put cash in a Roth or traditional individual retirement account each year, you could be well on your way to having a cozy retirement fund. You may even become a millionaire if you start saving early enough.

IRAs offer major tax advantages because your money can grow tax-free (Roth) or tax-deferred (traditional). But there are limits to how much you can save each year: generally $5,500 if you’re under age 50, $6,500 if you’re 50 or older.

If you haven’t saved the maximum for 2015, it’s not too late. You have until the federal tax deadline (this year, that’s April 18) to contribute.

“Don’t miss out on the opportunity to fully fund your IRA. You’ll want to make it a priority to contribute as much as possible each year,” says Brittney Knies, a certified public accountant in Indianapolis.

2. Spend your tax refund wisely

Last year, the average taxpayer received a refund of nearly $3,000. That can pay for a lot of smart money moves. If you’re expecting a check from the IRS, here are some ways to make the most of it:

Pay down credit card bills to save money in interest. And you’ll be one step closer to becoming debt-free.

Build an emergency fund. It’s a good idea to have three to six months’ worth of living expenses in a high-yield savings account, so you can be prepared for a financial emergency. If you’re not quite there, depositing your tax refund can give your fund a boost.

Upgrade your car the right way. Dealerships suggest using your tax refund as a down payment on a new car. But there may be better options to improve your ride that won’t put you in debt. Consider using your tax refund to fix your current car instead. Maybe it’s time for a new set of tires?

You could also use your tax refund to pay down your auto loan, putting you in a better position to buy a car a few months from now.

If you’re already car shopping, try to get preapproved for an auto loan from a bank or credit union. You’ll be in a better position to bargain with a dealership if you have an acceptance letter in hand. Ask the dealership’s financing department if it can offer a better interest rate, then calculate which offer is better — the dealership’s financing or your preapproved loan.

After you’ve checked off the major items on your tax refund to-do list, you may want to splurge a little. See these ideas for other smart, fun ways to spend your cash.

3. Spring-clean your finances

With nicer weather, many people focus on projects to improve their homes. You could also do the same with your personal finances. Think about reviewing your 401(k) plan or other investment portfolios to make sure they reflect your goals. If not, you may want to spruce up your portfolio by rebalancing your assets.

Browse your bank statements to see whether your bank is charging fees that you could avoid. If so, consider looking for a free checking account.

It’s also a good idea to declutter by tossing old bank statements and receipts. Shred the documents instead of just throwing them in the trash to make sure they don’t fall into the hands of an identity thief.

But hold on to any documents that support your tax filings. The IRS recommends keeping copies of tax returns and related paperwork for at least three years.

4. Make a plan to become debt-free

Start by creating a budget that cuts out unnecessary expenses. That can make it easier to free up cash to pay down debts. Next, focus on paying debts that charge the highest interest rates. To step up your plan, look for ways to bring in additional income to go toward your bills. And finally, it might be possible to consolidate your loans into one with a lower interest rate.

By paying off debt and putting your money to work for you, you’ll be placing yourself in a position to reap the benefits of financial freedom.

Margarette Burnette is a staff writer at NerdWallet, a personal finance website. Email: mburnette@nerdwallet.com. Twitter: @margarette.


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