Expecting a substantial income tax refund this year? GREAT!
You are in the majority; over 80 percent of Americans get money back at the end of the tax year, with the average refund being close to $2,900.Rather than having those precious dollars being absorbed into your normal spending routine, get the most out of your cash.
- Pay down high interest loans and lines of credit. With average annual interest rates for credit cards and personal loans hovering around fifteen percent (some even higher!!), paying off that credit card makes good sense.
- Fund Your Retirement Account. If you haven’t invested in a retirement account, seriously consider making a contribution to a retirement account right away. Your 70 year old self thanks you!
- Invest it. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 in the stock market, over thirty years, assuming a 12 percent return, you’d have $ 53,924! (Of course, do your research first before making any investment decisions and talk to licensed investment professionals)
- Open an emergency account. Most Americans don’t have money set aside for those financial emergencies that always seem to happen when there is no cash in the coffer. A large tax refund is a great start for an emergency account. Experts recommend that it should eventually total between three to six months’ worth of essential living expenses.
- Pay for repairs. Maintaining expensive possessions now will result in dollars saved tomorrow. Use the money to repair that leaky roof before it develops into a bigger problem; replace those dangerous bald tires with new, safe ones.
- Start a personal endowment. Investing in your emotional, physical, intellectual, and career growth is a wise use of money. Whether it’s paying for a gym membership or a cooking class, you’ll feel effects of this type of investment fast.
- Make an extra home mortgage payment (or two). Though you won’t feel the benefit immediately, doubling up on a mortgage payment now can save you months of mortgage payments later.
- Donate to a charity. Giving back to the community is a wonderful way of supporting a cause that you are passionate about. Even better – in many cases at least a portion of your donation is tax-deductible too.
- Open a College Savings Plan for your child. No kids? How about starting one up for a special child in your life – a nephew or a niece. For the most part, withdrawals are completely tax-free when used for higher education purposes. Talk to a licensed investment professional about your different options.
- Lastly, Plan a vacation – do something you’ve been dreaming of. Money is to be enjoyed as well as earned, saved, and invested. Go ahead – you worked hard for it!