Five Ways to Invest Your Tax Returns
This spring, don’t throw away another tax return on mindless spending: invest your money to reach long-term goals and improve your overall financial position. Here are a few ways to easily invest your tax return into something that will add value both now and in the future:
Pay off debt
According to CompareCards, more than 1 in 3 cardholders started 2020 with more debt than last year. Use your tax return to pay off high-interest credit card debt. For unmanageable debts, consider debt relief to reduce and eliminate debt. Your tax return can help fund the debt relief process, which reduces principal amounts owed and makes your dollar go further. Make this your year to become debt-free.
Open an emergency savings account
Having a savings account with several months’ living expenses tucked away is always a good idea. Use an online savings account that offers higher interest rates than brick-and-mortar banks. Google “high-yield online savings” and find the best deals from major brands—from HSBC and Citibank to CIT Bank and Marcus by Goldman Sachs—and earn nearly 2 percent on your money.
Save for a home
Similar to your emergency account, open a high-yield savings account earmarked for the down payment—usually 10-20% of the home purchase price. Divert your tax return into this savings account for several years, and you’ll be much closer to having the funds needed when you’re ready to buy your home.
Contribute to your retirement funds
Get your retirement funds in order. Contribute to your 401k through your employer, or your Roth IRA or Traditional IRAs which allows up to $6k contribution per year. The money will be a lot more valuable come retirement than it is now.
Invest in yourself
Whether it is a dental procedure you have put off, tuition at a local university to learn new skills, or purchasing startup equipment, investing in yourself is always a great idea. While fixing problems and increasing your overall professional value are not considered traditional investments, the returns can be just as beneficial.
By Oleg Yavorovskiy, founder and CEO, Guardian Debt Relief
Photo by Kelly Sikkema on Unsplash