Top Five Ways to Use your Tax Return


tax returnEach year, you might be accustomed to getting a tax refund. You have worked hard over the previous year, and if the government is returning money to you, you probably don’t have any extra cash to spare. Getting a tax refund can either be something that turns into something better if you invest it wisely, or it can be something that is wasted frivolously. Think critically about ways to invest your tax refund. If you are getting a blank on some ideas, then read ahead and discover some time-tested and proven ways that people have traditionally invested their tax returns over the years.

1. Start a six-month fund for rainy days so that you can be sure that you will be ok in the event that a rough economy deals you a swift blow. A lot of Americans were hurt in the last recession, and those that were living paycheck to paycheck did much worse. If your job suddenly ceases, you might not have any options left over but to use your rainy day fund. Chances are, if you got a tax refund in the first place, you didn’t earn all that much in the previous year, or it had to all go to necessary expenses. It’s wise to set aside whatever little money Uncle Sam returns to you until you lose your job. In today’s dead economy, it is a distinct possibility. Just be prepared.

2. Start funding an IRA. If you are not already set up with an IRA, then start one when you receive your tax refund. If you’re not yet 50, you can put in about $5,000 each year. If you’re over age 50, then you will have to put in $6,000 to catch up. Whatever age you are, it doesn’t matter. If you’re still working, then setting aside some money for retirement is one of the best things to put your money toward to. Any windfall that comes in should go straight to retirement. If you set aside all your tax refunds in an IRA fund from an early age, you would have a significant retirement income to live off of. You can just start stockpiling money. You want to retire comfortably and not be working into old age tirelessly.

3. You can also use that money from Uncle Sam to start your own small business. Over half a million businesses were started last year, and the tiny bit of money offered by the government in your tax refund can be a good seed investment in any kind of small business idea you have. You might not want to invest all of your money too quickly, but you can start out small. Make a few bold steps with the little money you have.

4. You can also invest your money in a traditional way. For example, you can use an exchange fund or a mutual fund. If you are a current investor, you can add a lot more money to your current holdings or you can add to your existing portfolio with a lot of new income.

5. You can also start a college fund for your kids. A 529 college fund is the most common one. If you don’t have children of your own, you can always invest in your relatives’ children. People can do this with their nieces and nephews, and a lot of them will end up going to college with the money. It is a great idea for a lot of young people.

These five ideas will help you put your tax refund to better use. Most of these things are essentials. They either critically help you earn more money, or they are for necessary expenses that you have to invest in in the course of your life, like retirement, portfolio, or college. These five things can be chosen based on their importance to your life in particular, and they are not given priority in any standard, necessary way. You have to choose what’s right for you with your tax refund, but these five options are some of the best choices you can make, and it is wise to pick from among them when you are selecting what to do with that money.

photo by hmk

Written by Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂

Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER and FACEBOOK . Happy investing 🙂

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