It’s that time of year where people eagerly await the mailman to deliver their overly anticipated W2s. If you are one of those anxious W2 recipients, it’s safe to say you’ve overpaid your taxes during the previous year (in this case 2018) in some way, which may not have been necessary to do. (I’ve written and spoken about those cases on more than one occasion. If you’ve missed it, check out recent posts HERE and HERE) If you’ve been dreaming for the day when W2s are in your hands, you probably have a mental shopping cart full of all of the things you’ll buy and flex for the Gram.
The IRS estimates the average tax refund to be $3,000. Let’s do some quick math. If you’ve received a tax refund in the past 3 years, according to that estimate, you would have $9,000. If you’ve received more than that for the past 3 years, do your math, and truly think on the money that’s been in your possession and that you’ve had access to. Now go one step further and check your savings account? Do you still have the money? Do you still have the clothes, cars, rims, or other bullshit that you spent the refund on?
9 times out of 10, the refund check is gone and more than likely, it was spent before you even had it in your account. Please don’t get me started on the amount of money you freely give away in fees and interest in order to receive the refund advance (in some cases, the amount is close to 30 percent!). In reality, if you haven’t been good with managing your money, you won’t automatically become a money expert once you receive a lump sum.
So before you blow those racks, let’s consider 7 places you can put that refund.
- Invest it There are several financial products that can place your money in a compounding environment, where you’ll continue to earn interest on your principal, and then interest on top of that growth. Some products are safer than others and some even offer tax benefits. Researching what’s right for you is key to understanding the ins and outs of how your money could be affected.
- Save it All savings accounts aren’t created equally and therefore some provide higher interest rates. Virtual banks don’t have the overhead of ones with physical locations and tend to offer higher returns. Any savings is better than none. Put the refund in a savings account away from your everyday checking in order to remove the temptation of dipping into it.
- Put it If you’re a renter with at least a 580 credit score, obtaining a mortgage is possible with a minimum of 3.5% down payment. Think about it! A $100,000 home under the aforementioned program will require $3,500 down. In most cases, purchasing a home can be done under the same payment as you’ve been paying in rent or less!
- Fund it The last time I checked, college isn’t getting any cheaper. If you’ve gotten refund credits due to having children, how wonderful would it be to set your child in the right direction for college, early? Starting a college fund for your children early can help lower the cost of college and eliminate the need for student loans and debt for your children. If you happen to be a parent struggling with student loans, imagine how free your children will feel without that burden. Imagine how much pride you’d feel, knowing you’re the reason why.
- Learn It Knowing what to do with your money or how to make the best financial decisions might cost, but what you gain in return could be even greater than any dollar spent. Investing in a financial advisor who can provide guidance and a financial blueprint for your future can change the course of your financial future and money habits.
- Credit It If your credit is below acceptable, you’ll pay more for everything you finance. Repairing your credit will be necessary to provide greater opportunity for you to keep more of your money. Many credit repair programs are costly, but the gain as a result can prove priceless.
- Debt It You know those credit cards that are maxed out and the medical bills you’ve been avoiding? Get it off your back and out of your new year! Take your refund and cash out old debts that are costing you more and more money in interest that you’ve been avoiding.
You have options when it comes to your money. Keep in mind, you’ve lived without the money for 12 months, so it is clearly money you don’t need to survive, so you can afford to be smart.
Making sure you make the best decisions for you and your money is key. As always, if you’re not self-employed, avoiding a tax refund all together is quite possible. Getting your refund throughout the year in each check is an available option, rather than waiting for it for a whole year, each year. For more information on how to increase your monthly check, visit: PayCheckBump.com
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