For many, having a couple thousand dollars back from taxes is the perfect opportunity to travel, purchase a new piece of furniture, have a night out, or treat yourself. However, others choose to use their refunds for long-term gains. Going this route is a great way to help secure the quality of your financial future. From paying off debt to planning for retirement, learn some of the best ways to invest your tax return from your local tax specialist in Denver.
Paying Off Debt
One of the top ways to invest a refund is to pay off debts. If you have any credit cards, especially high interest credit cards, it is important to create a plan to pay those off. The longer you have high interest credit card debt, especially when it is at a maxed out or close to maxed out limit, the more severe damage you can do to your credit rating. When you carry these balances for long time, it can make it harder for you to get credit in the future. Whether you need to just get started on paying off debt or if your refund will handle the entire balance, it is crucial to consider this option if you are carrying harmful or potentially harmful debt. In addition, you may have other forms of debt that require being paid off, such as student loans. Consider your tax return as â€œout of sight, out of mindâ€ and immediately plan what to do with 100 percent of the refund once you receive it, so you are not tempted to use it in less responsible or beneficial ways.
Create or Add to an Emergency Fund
Are you prepared if something happens to your home, car or even you or a family member? This is why it is best to always have an emergency fund built up just to handle lifeâ€™s surprises. When trying to come up with how much your emergency savings should be, you can consider your monthly expenses. If you became out of work tomorrow, could you afford to pay your mortgage or rent, keep the lights turned on, buy groceries, and fill the gas tank in your car? Itâ€™s important to plan for those things. For some, instances arenâ€™t as drastic but when something might break on your car or house, you may have to contribute a couple thousand dollars to fix the issue. This is why it is important to build up an emergency savings to help you cope with the issues.
Retirement, College Planning, HSA, Savings and More
Another great way to spend your tax refund is to invest it in your future. Do you have a retirement fund? Invest! Avoid common misconceptions about modern retirement planning by reading Consumer Reportsâ€™ new rules of retirement planning
. If you are a parent, consider creating a 529 plan, which is a plan to save for college. Or, if you have a health savings account, contributing more is a great way to take advantage of tax-free healthcare. Last, you can place your refund in a savings account. Even if you spend some for leisure over time, having a majority in savings can be a great long-term investment.
For other ways to be smarter with your refund and finances, read these budgeting tips from your Denver accountant
. For help with your finances, Bloch, Rothman and Associates is your go-to premier accounting and tax specialist that can help. We offer services for both individuals and businesses. Contact Bloch, Rothman and Associates
today to get started.