In 2019, the average tax refund was $2,869, which is almost an entire month of income for many Americans. A sudden influx of cash makes it so tempting to splurge, but does that align with your long-term financial goals? As savvy responsible women, we have options besides breaking the bank on a new pair of heels, a lavish vacay, or a designer purse.
Have you thought about how you will use your lump sum of money this year? It's not too late to make smart financial decisions. If you want to invest in your future, then learn the best ways to invest your tax return instead of blowing through it.
Start Or Grow A Business
You may be a founder or thinking about becoming a founder. Either way, an investment in something that's all yours is a great way to spend your tax return. In 2019, there were 30.7 million small businesses in the U.S and nearly 80% of those businesses employ only the founder. Business is booming! Instead of spending your money on material things that give you instant gratification, use your tax return to start or grow a business that helps you in the long-term.
The majority of businesses are started using personal savings. You never know what could happen. You could turn your tax return into a profitable business that pays for the luxuries you didn't splurge on this year.
Create Or Expand An Emergency Fund
If you haven't created an emergency nest egg, then this is the perfect opportunity to finally create one. You don't have to dedicate all of your tax return to an emergency fund, but it would be smart to dedicate at least a small portion. If you already have an emergency fund, it doesn't hurt to expand because emergencies are truly unpredictable. It's better to be safe than sorry.
Invest in Career-Building Certifications Or Continuing Education
The most successful business leaders in the world all have different paths, but they tend to agree on one thing. Learning is key. When the average person has 10 jobs by age 40 it's easy to understand why highly accomplished people preach the importance of staying competitive by continuing your education. This doesn't mean you have to run to the nearest university and spend a ton of cash. Continuing your education is as simple as taking an online class, buying helpful books, or gaining a certification. Whichever method helps you to acquire knowledge to better yourself. Whether it's for financial gain or to fulfill a passion of yours.
Leave Your Debt Behind
Paying off your current debt is a fantastic way to spend your extra cash, especially if your interest rates are sky-high. The less debt you have, the less accrued interest.
This is the perfect time to pay off existing credit card debt, especially debt that you acquired in anticipation of tax season. Or, contact your student loan servicer to make an extra student loan payment. Ditch the monthly minimum this month, so you save money in interest costs. Just make sure to prioritize debt with the highest interest rates.
Invest In Valuable Stocks
Investing your money now could potentially make you rich in the future! According to an analysis by Rubicoin (digital educational investment platform), had a person invested the average tax refund of $3000 in Netflix, Apple, and Amazon over 10 years, then their $30,000 investment would have turned into $220,000! Now that's a good return on your investment.
Just think, with the proper research and strategic investment decisions, that could be you. Stock ownership is a great source of passive income. Make money while you sleep! Investing in stocks is perfect for someone who isn't scared of taking on risks to potentially reap the benefits in the future.
Save To Buy A Home Or Increase Home Equity
If you want to leave behind the days of renting or living at home, use your tax return towards a down payment on a house. Start the journey towards saving enough money to cover a down payment and closing costs for your home. Next year, you could be sitting in your very own place decorated to your liking!
If you already own a home, then use the extra cash to increase your home equity. You can make extra mortgage payments or make a direct payment to the principal. Paying down housing debt can help to lower interest expenses over the length of the loan. The more home equity you have, the less you owe while gaining more value in your home. Unlike many other forms of debt.
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