3 Smart Ways Your Tax Refund Can Boost Your Wealth
In order to produce the podcast and keep content up free for you, I work with partners so this post may contain affiliate links. Please read my full disclosure for more info.
Expecting a tax refund this year? Learn how you can enjoy it now and set yourselves up to build wealth!
Want to Get the Most from Your Tax Refund?
You can watch this week's video here or you can read below the highlight and grab some resources to make the most of your tax refund!
3 Smart Ways Your Tax Refund Can Boost Your Wealth
Tax refunds can be a great opportunity to set yourselves up for an awesome year financially.
I'm going to give you three ways that you can do this.
Build Your Emergency Fund
The first way you can boost your wealth is making sure you have a financial cushion.
That's right; make sure that you have a starter emergency fund set aside that stashed away for any hiccups that can come up this year.
On another marriage and money tip episode, I shared how to calculate what's the best number for you.
As a general rule of thumb, though, if you haven't already please make sure you have at least $1,000 tucked away.
This can take care of car repairs, one of you gets sick, or if you have an emergency with the bills your savings can help you smooth out those rough patches without messing up your monthly budget.
We can't control a lot of things with what happens to us but the better prepared we are with savings, we'll be less stressed.
Pay Down Your Debts
the second way you guys can make this tax refund go so much further is by paying down or paying off your high-interest debts.
Yep, I'm talking credit cards. If you have them you probably already know that they are basically quicksand with your monthly budget.
You're not going to see that money again and if you're only making minimum payments there's going to be a constant drain on your finances.
Go ahead knocked down a few of those with your tax refund!
Invest in Your IRAs
Finally, the last money savvy way to use your tax refund is to contribute more towards retirement.
Now did you maximize your contributions with your IRA this past year?
Don't worry if you haven't. You can make up for it with this year's tax refund. If you haven't already and open an IRA and start contributing towards retirement.
Ther are some wonderful options I have listed in the resources section. The earlier you start contributing the more compound interest works in your favor.
Resources to Check Out
There you have it three ways that you can use your tax refund to build wealth.
If you're getting ready to file your taxes or are waiting for your tax refund to come in, here are some resources that can help you make the most out of it.
Too Big a Refund? Boost Your Paycheck Instead
Just a reminder if you're getting a huge tax refund double check why.
It could be that your withholding way too much on your paychecks. While we all love having a nice big lump sum, it would be better for you to have that money in your paychecks sooner rather than later.
Bonus Tip
If you're looking for other ways to save and build some wealth look at your 401(k) especially if your employer offers a match.
Not only will investing feed your retirement fund, it will lower your taxable income now – double win!
And if you need help with your 401k, please check out blooom. They're an incredible service for less than the cost of Netflix.
They can manage your 401(k) based on yur needs, help minimize needless fees, and you have access to a certified financial planner if needed.
Oh, and while I do want you to be smart with your money, don't be afraid to celebrate and have some fun.
Talk it over and see if you can set aside 10-20% of your refund towards a vacation or something that you guys have been saving up for.
Thoughts on Tax Refund Plans
I’d love to hear from you about your plans. How many of you have received or are expecting a refund this year? What are your plans for it?
That’s definitely some solid advice. We used a similar approach with our tax refunds the past several years as one of the strategies that helped us achieve debt freedom! Keep up the great work with your finances, relationship and this blog.
That is exactly how the Honeybee and I built our emergency fund, Elle. It is a painless and easy way to build a substantial emergency fund over time – especially for those who have trouble maintaining fiscal discipline.
All the best,
Len
Len Penzo dot Com
Great post. My hubby and I keep our finances completely separate. My portion of the tax refund (which was higher than expected due to my financially irresponsible purchase of a new hybrid vehicle last year) is going into savings to help me bolster my emergency fund. Hubby’s portion is going toward his highest interest debt.