The smartest thing(s) you can do with your tax return.
Written by Matt Wegner
Founder and Lead Counselor, Matt Wegner Financial Coaching, www.financialexcellence.net.
So you filed your taxes and have a return coming. Or maybe you waited until the last minute to file and you’ll have a return coming soon. Have you thought about what to do with the return? If you’re like a lot of people you haven’t even given it some thought yet. Or you’ve got three or four ideas but don’t know which one to do. Here’s the deal. If you don’t have a plan for your money, it will come into your hands and go right back out before you even know what happened. Here are some tips to help you plan ahead with your tax return.
1. If you are behind on any bills, get caught up quickly. If you ignore late bills or debts it will come back to haunt you. Start with your necessities. Get current on your shelter and transportation first.
2. Set aside some money for emergencies. Get $500 to $1000 in the bank and don’t touch it! Save this money for a true emergency like when the transmission breaks or the heat goes out.
3. Build up your emergency fund until you have 3-6 months of expenses in a savings account just for emergencies. In today’s economic times you’ll want to be closer to the 6 month level.
4. Start investing 15% of your income for retirement. Now is the best time to invest. Investments are on sale at 50% of what they sold for a year ago. I call that a good bargain. A prudent investor buys low, holds for the long term, and sells high.
5. Start planning for education expenses. If you want to send the kids to college or maybe yourself, the best way is to graduate debt free. Start planning ahead for scholarships and take advantage of tax-advantaged investments for education.
6. Pay off the house early. If you’ve followed the above steps before now, you’re debt free except the house. The only step left is to pay off the house. You’ll be surprised how fast it will go. And how good it will feel!
7. Build wealth and give more than you ever thought possible. How great would it feel to be completely free from the chains of debt and be able to give to any cause you wish at any time? Better than you can imagine!
There are a lot of other things you can do with your money, but by our society’s norms, they all involve spending more and borrowing more. This year, why not use your tax return as a kick-start to a lifestyle change. Don’t settle for normal. Choose to be different. And Debt Free!