If you’re like many other Americans, you’re anticipating a tax return for 2019. And while it is easy to think of this as extra money, the reality is that you worked for this just like you do every paycheck. Before you get too excited, it might be wise to step back for a moment and think of ways your money could do you and your family the most good. With a little planning, you can make sure your tax return money serves a purpose for years to come. If you aren’t sure exactly what you’ll do with your cash, keep reading to hear our tax return tips.
An unfortunate reality of living in America means that you probably don’t have access to free healthcare. Because of this, Healthcare Dive estimates that approximately 22 percent of adults forgo necessary medical services because of price. Taking care of your health is hands-down the most important thing you can do for yourself and your family. If you’ve been putting things off, it’s time to make an appointment with your doctor. Otherwise, what you think is a little problem escalates into a serious decline in your overall health.
If you’re a business owner, you can invest your tax refund in any aspect of your business that needs help. For example, if you need to upgrade business-related tech, such as project management software or your smartphone, this can be a wise investment. Or, you can buy a piece of fitness equipment to keep your health in check at the office. If you don’t have room for a workout machine, you can buy something more portable like an under-the-desk elliptical. This way, you can get active at work and avoid sitting for long periods of time. Look for top-rated ellipticals and check the measurements to make sure you’re buying the right one for your desk.
Your rainy-day fund is essentially money that you set aside to cover the unexpected. Financial disasters can strike at any time. Having an extra $1,000, $2,000, or more at the ready can save you from racking up excessive credit card debt.
Speaking of credit card debt, if you are currently sitting on a balance, now is the perfect time to make that disappear. Credit card debt is one of the hardest to pay off since you always have the option – and the temptation – of running it back up as it gets paid. Unfortunately, it’s also one of the most expensive forms of credit, with interest that compounds each month. To get a better idea of how much money you could save by wiping your credit slate clean, enter your balance, interest rate, and current monthly payments into an online calculator, which is provided by FinancialMentor.com. As an example, a $1,500 balance with a 15 percent interest rate will cost you an extra $1,289. This would take nine years to pay down if you currently pay $25 per month.
You don’t have to have thousands of dollars to begin investing. In fact, you can buy into mutual or index funds, or purchase individual stocks or bonds with a surprisingly small amount of cash. As financial blog Dough Roller explains, however, there’s a lot to learn about investing. Your tax refund can give you the money to start, which you can then build upon over the years as you work toward your ultimate goal of a comfortable retirement.
When it comes to your tax return, there is a right way and a wrong way to spend it. Don’t throw it away on frivolities you would not buy for yourself at the end of a typical week. Use it to fund your financial security today, invest in your home or health, enhance your business, or secure your future.
A CPA with more than 10 years of varied public and private accounting experience, Ben has led many complex financial projects to successful outcomes.
Ben holds a B.S. in Accounting from the University of Maryland.