Find out what to do with your tax refund this year below.
Its tax seasons! For some, this is when “Big Brother” has your back by giving out tax refunds to most working Americans.
The tax season can really be a welcoming event, for a lot of families it is a way to start the year anew. By the time most of us get to the end of the previous year we are usually strapped for cash.
Still recovering, financially, from our traditional holiday seasons that feature Thanksgiving, Christmas, and New Year’s Eve.
Many savings tend to take some big hits around this these times.
I know mine usually do.
How many of you guys blew a lot of money in November and December and can relate?
During these times bring about many shopping, dinners, and parties which can easily mess up the budget.
So, the idea of getting a surplus of income from your taxes is exciting but can also be stressful.
The extra income puts you in the position to be responsible and pay off some debt and creditors.
The reality is most people get their tax returns and blew through the funds like it was an extension to the holiday season.
The returns are spent on more wants than needs and little to no improvements are made to our financial situations.
In fact, some of us find ourselves in more debt than we were in before Uncles Sam’s tax refund.
You know who you are, and I know who you are because in years past I was you.
I am going to share the top five income tax return mistakes I have seen and made myself.
But, also how you could better spend your tax refund.
Refund Mistake 1: Didn’t Pay Bills
This one should be the automatic thing to do, but most of us don’t. I used to be that person that will have an expensive holiday season and take my tax money and spend more.
Refund Mistake 2: Lend Out Money
Big no-no! I have lost good relationships between friends and family because I lend out money and did not get it back in a timely manner.
Dave Ramsey says it in his book The Total Money Makeover, “if you don’t want to ruin friendships, don’t lend money.”
Refund Mistake 3:Used for Down payment
One year I used most of my tax refund towards a down payment on a car and still had to finance. Even with the down payment I almost paid double what the car was worth.
My interest rate was not too good during my yesteryears. 🙁
Refund Mistake 4:Booked A Trip
There is no problem enjoying life. You deserve a break or some type of reward for your yearly efforts.
But per my experience, I would advise against this.
Depending on where you go and your company, funds can get depleted rather quickly.
Refund Mistake 5:Spent on Electronics
While the latest and greatest gadgets will have you feeling like you “have to have it.” The truth is most of the time when they first come out they are super expensive and less than a year and a half are replaced by a newer or better model.
So, it’s a waste i.e. smartphones.
Refund Mistake 6:Start A Business
This one is a bit of a tie. While I am all for business start-ups. We all know some business need capital to get going, but just because you come into extra funds doesn’t mean you can just through money at random projects.
The problem people get into is a lack of research and commitment, which in turn cause their business/venture to fail, waste money, and time.
Pro Tip: Starting a blog is a safe way to grow business with a small amount of capital
Start a Blog
Blogging is a great way to make money on the internet. With consistency, and patience you can earn a decent income while working from anywhere!
My blog has allowed me tomake money from homeonline. Allowing me to stay home with our children without causing financial stress to our family.
I’ve read so many success stories – I honestly believe (blogging) is areal way to make money from home.
If you are interested in starting a blog of your own, I created a tutorial that will help youstart a blog of your own for cheap, starting at only $3.75 per month (this low price is only through my link) for blog hosting. In addition to the low pricing, you will receive a free website domain (a $15 value) through myBluehost linkif you purchase, at least, 12 months of blog hosting.
Refund Mistake 7:Shopping
As a society, we spend more than we save, even if we come into a little extra money.
That’s right most of us will end up spending our refund on goods and services.
We just love to consume! Guilty.
Refund Mistake 6:Cosmetic Surgery
More and more this is becoming an increasing new fad in what people are spending tax refunds on.
Expensive surgeries such as body augmentation require hefty payments.
Here’s the deal, we are more likely to end up spending our tax refund money are on things that are want instead of needs; items that we have wanted but could not afford.
Which may further cause more debt or expenses.
Let us work on ending the cycle of bad financial decisions, as the tax refund is a great opportunity to impact our finances more positive.
How and what you should really be spending your tax refund check
We talk about some of the not so smart ways that I have misused and seen refunds being misused. Here is a list of better options to spending your tax refund that will get your finances in order and set your future self for better success.
Smart Ways to Spend Your Tax Refund 1: Payoff Revolving Debt
The number one recommendation for spending your tax refund is to pay off debt.
Credit card debt are one of those expenses that tend to trap people on a hamster wheel to nowhere.
With high interest, it can take forever to make an impact on your debt, especially if you can only make small or minimum payments.
Pro Tip: Applying your refund to your debt can either eliminate or bring down your monthly payments
Smart Ways to Spend Your Tax Refund 2:Start an Emergency Fund
Did you know most working Americans do not have money aside in case of an emergency? Meaning most of us are one accident away from being devastated financially.
Utilizing your tax funds is a good way to create a little nest egg for emergencies.
Putting about 25% to 30% away would be a good recommended start.
Smart Ways to Spend Your Tax Refund 3:Invest in The Market
This can be a little more a riskier and there is a chance for a loss here.
Pro Tip: Do a little homework and maybe use a professional advisor for direction
On average and historically the market has produced better returns on investments than traditional savings account and CDs.
We are talking about 10% to 12% historically, helped by compound interest (money earning interest or interest).
Smart Ways to Spend Your Tax Refund 4:Fund a Your Retirement Account
Now more than ever is the best time to open a retirement account. Especially if your current employer does not offer any type of retirement option, such as a 401k or 401b.
Look into funding you’re on traditional IRA or Roth IRA the sooner the better is with each passing investing year missed, professionals, have determined that could thousands of dollars in lost savings missed.
Which can be substantial during your retirement years.
Smart Ways to Spend Your Tax Refund 5:Add to Current Skill Set
Funding your education is always a good thing and I have no issues if your tax refund is used to better yourself and your career. I do advise on doing a little research as there are a lot of free programs out there that can also help you get or stay ahead.
Smart Ways to Spend Your Tax Refund 6:Start A Business
I know, this made the negative list above, but that was only because people to tend not to research. Starting a business after doing research is a good way to invest your tax refund.
One business you could start with little capital, which I recommend isablog.
Start a Blog
Blogging is a great way to make money on the internet. With consistency, and patience you can earn a decent income while working from anywhere!
My blog has allowed me tomake money from homeonline. Allowing me to stay home with our children without causing financial stress to our family.
I’ve read so many success stories – I honestly believe (blogging) is areal way to make money from home.
If you are interested in starting a blog of your own, I created a tutorial that will help youstart a blog of your own for cheap, starting at only $3.75 per month (this low price is only through my link) for blog hosting. In addition to the low pricing, you will receive a free website domain (a $15 value) through myBluehost linkif you purchase, at least, 12 months of blog hosting.
It can take a little time, but once you get it rolling blogging can’t generate nice recurring income.
As you can see there are a lot of things you can choose to spend your tax refund on good and bad.
As I mentioned I have made a lot of mistakes with my refunds, which looking back today wish I could have changed and done differently.
Now, that I have lived my mistake I wish to help you prevent repeating mine and what others have done with their tax refund.
The tax refund is really an opportunity for us to recoup from financial situations that you may be going through.
If you choose wisely and avoid temptations it can be used to spring you forward in many aspects of your lives.
As you think about what you will do with this year’s tax refund, put your future self-first and make the decision to be better and do better.
Smart Things to Do with Your Tax Refund
