It's that time of the year again. You've gotten you're W-2 form, you're e-mail inbox is being flooded by tax preparers and if you've paid a substantial amount of taxes throughout the year, many of you will be getting a tax return. Like me, you've probably had your eyes on that new big purchase you haven't been quite able to justify adding into your current budget, but don't be weak. Let's strive to be great and prepare for a better future and invest in yourself and your future for the longterm. Want to be smarter about how you spend your tax return this year? Here's a list of 5 ways you can put your tax return to good use and make your money work for you.
Invest in yourself
If you have a knack or interest in something like a new hobby; writing, T-shirt business, photography, dancing, real estate. Try using your tax return to invest in your next idea. A few hundred dollars may not seem like a lot to kickstart something new, but just think about it. A couple hundred to a thousand dollars can build a website, purchase a press machine or design software, a decent camera and dance and real estate classes. Although there could be risks in branching out to something new or potentially failing; the possibilities are limitless. If you're not investing in yourself how can you expect someone else to?
Just start your retirement savings
Unless you come from a legacy family that has generational wealth, retirement is something that you must save up for and if you plan to retire comfortably you have to plan and commit to making it an investment of priority. There are tons of ways to save for it, but I am only gonna talk about what I know first hand.
- 401(k)
One way to make your tax return work for your retirement future is to put the money into your 401(k) account. Although technically you can not deposit the money into your account directly; you can speak to members of you HR department and ask them about an option to match your refund and have that amount diverted out of your monthly paycheck and into your 401(k) account and use your tax refund to pay your monthly bills.
-IRA (Individual Retirement Account)
If you don't have a 401(k) you can use your tax refund to buy low funds in an IRA. There are tons of tax incentives for taking this route. Most people who invest in IRAs usually talk to bank/ financial advisors at their banking institutions for information.
Start saving for college
Many of you are rounding the last curve of your twenties and with that comes milestones; advanced degrees, promotions, engagements, marriages, first home purchases and having your first child. Another way to invest your tax return is to put the return into a 529 College Savings plan. A 529 Savings plan is a plan that is operated by a state or an educational institution that was created by the IRS to help families set aside money to invest in their family's college education. There are many benefits, tax incentives and a few other perks. If you'd like to know more about the 529 College Savings plan click here.
Buy a great experience
One of the best things you could ever do for yourself is to treat yourself, but I'm not talking about buying a new toy or trinket. One of the best and most rewarding things I've ever done for myself is purchase my passport and a round trip flight for a 10 day 6 city excursion through Italy. Your tax return could fund your next escape, your work ctrl + alt + delete or your next Ms. Frizzle educational excursion. Get a passport, buy a ticket, put your new hobby to work in another country and meet new people. Who knows, if your new interest was writing; now you'll have something to blog about.
Pay down your student loans
Some of you are blessed enough to have had your education paid for while others have gone to college and have debt the size of a home mortgage. I have a really good girl friend who just recently received a congratulatory letter in the mail for paying the complete balance of her student loans and she's only 26. When I asked her how she'd done it so quickly, she said she'd used every tax refund, holiday work bonus and monthly payments for the past 5 years. Have you ever thought about using your tax return to pay off your student loans? I must admit the thought never occurred to me until that day.
Set it aside for a down payment
Have you ever scrolled through Pinterest or Tumblr and found yourself homelusting? (yes, I made that up. Sue me.) Do you ever daydream about what your dream home would look like? The open floor plan, the floors, the number of rooms, the immaculate organized boudoir of a closet, the kitchen and the appliances, the furniture. I. AM. HAVING. A. MOMENT.-- but you get my drift. I know that I do. After two years of having roommates in New York City, I often times find myself getting lost in the idea of having a home to myself again and I'm sure that many twenty somethings, like you and I, living in major cities, often think about the sacrifices we will have to make to have those dreams become realities. So why not take your tax refund and sit it in a savings account and allow it to accrue interest until it's time to make that purchase?
With age and experience finding new ways to invest into my future and making my money work for me is becoming more and more of a priority than before. I am finding financial security and happiness are slowly replacing my urge to use my tax refund to buy designer shoes or to be blown doing frivolous things. Finding new books about investing and listening to my peers talk about what they do to save, purchase and travel excites me and gives me hope in knowing that I'm on the right track or that I can do better. Becoming a responsible adult is changing me and I am excited about it and I hope that you are too!
Are there any readers out there that have any suggestions to add to this list? I'd love for you to share.
Happy saving!
xxo,
AGamine
image via qwestore
