For millions of Americans, the IRS is making it rain. That’s right, taxpayers are celebrating their tax refunds and dreaming of ways to use the extra cash. Impulsive purchases are a quick way to watch the money disappear as quickly as it hit your bank account. Being wise with a refund can benefit not just the wallet, but also give added peace of mind.
Earlier this month, we told you about five ways to use your tax refund wisely. We have some more suggestions for the top ways to save it or spend it:
- Retirement Roadmap. Saving for retirement can be extremely difficult, especially if the extra money is more important now. However, with the average American spending nearly 20 years in retirement and needing upwards of 70 percent of their preretirement income, biting the bullet and saving sooner rather than later is critical. Proactive steps include contributing to a 401(k) plan (automatic deductions make it easy and you don’t pay taxes until you withdraw money); starting a Traditional Individual Retirement Account known as an IRA (deducting the amount contributed may be an option), inquiring about an employer’s pension plan (ask for an individual benefits statement), working with an investment company (let someone else do the work) or simply saving (just don’t bury it in cans in the back yard).
- Pay it Forward. Contributing to charity not only benefits the organization, but also opens the door for large tax deductions come next tax season. Yes, while tax season is just wrapping up and thinking about next year is not on the horizon, taxes should be top of mind throughout the year. The entire tax refund does not have to be donated to charity, but giving a portion of it as a monetary donation or going through old clothes, toys and house items to donate before going out and buying new things is good practice. Give away old stuff, splurge on some new stuff and deduct next year for a bigger refund.
- Explore your Passion. Generating a second income stream is an achievable possibility in today’s world. Think of ways to morph that writing and shopping passion (addiction) into a small (or large) money making machine. With social media being everything right now and blogs running the Internet, jump on the bandwagon, and use the tax refund to build that shopaholic on a budget blog. If blogging becomes a profitable business, deducting the expenses may be an option next year! #Winning
- Got Stress? Reduce it! Between finances, work and family, life is a never ending to do list. If dealing with large amounts of stress and anxiety, use the tax refund to nurture one’s mental state. Purchasing a gym membership, going to therapy or taking in a few spa days could be just what the doctor orders to reboot. Remember, if the doctor prescribes it, deduct it. (Medical expenses must meet IRS qualifications to be deducted.)
- Bon Voyage. Now for permission to use tax refunds for something fun! What’s that? A catch? Well, yes, there is a catch. Life is all about choices, and TaxSlayer suggests choosing financial bliss. So, being cautious with spending habits over the past year, stashing some funds away for retirement and knocking out debt on a few credit cards means it’s time to go ahead and splurge! Hawaii is gorgeous this time of year.
Still need to file your tax return? Your refund is waiting! Get started now!