 It's that time of year once again to round up all those tax deductions and head off to the accountant! In the upcoming weeks, checks will start pouring out from the IRS to millions of Americans who paid more than their share of taxes. With the uncertainty of todays economy, it is vitally important to make sure you make the most of any refund you receive and to disperse your money wisely.
Here are Four Things NOT to do With This Years Return:
1. The "rapid refund". This is nothing more than a quick loan with extremely high interest, often averaging more that 120%. If you look at the end result, this is NOT a refund at all, it will cost you money and that's why it's first on the what NOT to do list!
2. Spend it all! So many times people get that refund check and indulge in self gratification. There is nothing wrong with splurging on a little something for yourself, but be cautious. Don't buy impulsively, the refund will be gone before you realize it. Instead, plan out your purchases for maximum satisfaction and try to set some aside for savings or emergency purposes.
3. Deposit and leave in your checking account. While this sounds like a good idea and I am sure you have good intentions- don't do it. Before you know it, it will be spent on little, unnecessary things that you won't even remember where it went after it's gone.
4. Lend your money. This may sound harsh and rude to not lend out your money to a friend or family member who asks, but why should you lend your money - interest free, and in turn have to pay interest on your own bills that you could have paid off if you had the money in your account?
Here are Ten Better Ideas for Your Return:
1. Plan to put one fourth of your return away in some type of interest earning savings. If you don't already have a "safe savings" account, now is the time to establish one. This should equal about 3-6 months of living expenses.
2. Make sure you have enough money to pay any up coming bills, such as real estate taxes, vehicle insurance, homeowners insurance, etc.
3. Make an investment that could seed your own business, this can be tax deductible next year and also, give you another stream of income.
4. Know the difference between "wants" and "needs". A want is something you desire, a need is something you must have to survive. Go for the needs before the wants.
5. Do a home improvement project to make your home more energy efficient. This will give you a fresh feeling and adds value to your home. It should also save you money over time in less expensive utility bills.
6. Lay the foundation or your children's financial future. Start a small investment or open a savings account.
7. Rid yourself of as many monthly payments as possible. Pay off the ones with the highest interest first.
8. Start a retirement plan such as a Roth IRA, or add to an existing one.
9. Make an extra mortgage payment. By paying one extra mortgage payment each year, you could reduce your interest by about 20%. So on a $150,000.00 mortgage at 6% for thirty years; you will save about $26,000.00 in interest.
10. Invest in your health. By keeping yourself healthy, you can avoid unwanted medical bills.
As you can see, there are a wide variety of things that you can do with your tax return to help improve your financial status or set a strong financial path for your future. |
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