Tax season is almost over and you may be expecting a refund from the government. If you’ve already been shopping for a larger flat screen TV, maybe you should consider a few more advantageous uses for that check from Uncle Sam that will add value to your investment portfolio. Amazingly, millions of people blow their tax refunds within hours or days of receiving it. Instead of using the money on items you won’t remember next year, put some of your refund towards the future.
Pay Down Debt. It sounds simple, but is a foreign concept to much of the country. Pay off high interest credit card debt, car loans or pay day loans – giving you more monthly income to spend through the year. Consider putting a chunk towards your existing mortgage or using the money as part of a cash down payment.
Home Improvements. With a sizable chunk of spendable cash, take advantage of the opportunity to do a larger improvement. Upgrade your kitchen appliances, have the exterior of the house painted, redo the guest bathroom. Key improvements can not only increase the value of the home, but it will help you feel like you got a new house.
Invest in real estate. Maximize your funds by investing in real estate. Even vacant lots can be held for future development projects, or consider buying less expensive properties to use as rental income. Real estate can be a practical method of growing your wealth portfolio.
Fund an IRA. Establish a real estate IRA which can be used for retirement. Contribute as much as you can through the year and quickly build up a sizable account. A real estate IRA can be used to purchase investment properties and rentals. Consult your tax professional for details about how to best utilize an IRA.
Invest in your kids. Help your kids start gaining an interest in money matters by purchasing real estate for them to invest in. Help them to take financial literacy seriously, and work together to find opportunities for them to invest in. Sign them up to take a class on budgeting and money management, help them establish a bank account and begin practicing money handling skills.
Hire an accountant. If you are still using a weekend tax advisor to handle your return, consider taking some of your return and hiring a tax professional. Not only are they a source of information about saving and investing, they can often help you find additional ways to reduce your tax bill.
Tax deductions. While you’re meeting with your new accountant, ask about tax deductions. Find out what appropriate tax deductions you can take, then ‘blow’ some of your money on those items. That way, you get the urge to spend over with, and you are at least helping your tax bill for next year shrink.
Making a plan before you get your tax refund will help you avoid the overwhelming urge to head to your favorite store and start shopping. Sticking to your plan now will help you be able to splurge more later.