If you are like most people, you will be getting a tax refund when April 15 rolls around, but what you do with that refund can make a huge difference. You could spend the money on a vacation or eat out at a fancy restaurant every day, but there are better ways to use those funds.
Feel free to treat yourself to something nice, but keep some of the money for other, more valuable, investments. If you spend your tax refund right, you could greatly enhance the value of those funds. You might even lower your tax bill for next year, so you can get an even bigger tax refund down the road.
Invest Your Tax Refund
There are smart ways to use your tax refund, and these strategies can actually lower your tax bill going forward. Here are some investment ideas to help you make the most of your upcoming tax refund.
Open (or Add To) a Health Savings Account
If you do not already have one, a health savings account, or HSA, could reduce your tax bill and help you handle an unexpected medical crisis. The money you invest in the HSA is fully deductible, and you can use the funds tax-free to pay eligible medical expenses.
You must have a high-deductible health insurance plan to qualify for an HSA, so check with your human resources department or insurance broker to make sure you meet the requirements. The money you put into your health savings account does not expire, so you can use your tax refund money to beef up the account.
Contribute to Your IRA
Using your tax refund money to fund your IRA contribution is another smart decision, and another one that can save you more money going forward. If you opt for a deductible IRA, you can reduce your tax bill for the coming year, so hopefully next year’s refund will be even bigger.
If you opt for a Roth IRA, you forgo the immediate tax savings, but you get tax-free withdrawals in retirement. Either way, using your tax refund to open or contribute to an IRA can be a very smart investment.
Invest in Your Good Health
Tax refunds typically show up near the beginning of the year, the same time gym memberships spike. Why not use that found money to fund your gym membership, so you can invest in your good health?
Investing in yourself is a great way to stay healthy, so you can spend less money on doctors and more on your family. Even if you do not improve your health, you will feel better, all courtesy of Uncle Sam.
Invest in Your Home
Investing in the roof over your head is another smart way to use your tax refund. If you have been putting off home repairs or that much-needed home improvement, tax refund time is a great time to do it.
Putting your tax refund money into your home can improve your quality of life, but the investment can also enhance the value of your property. That is a win-win, and one more reason to use your tax refund money wisely.
If you are in line for a big tax refund, do yourself a favor and do some planning. Instead of blowing the money on something you do not need, look for strategic ways to invest at least some of the money. You will be glad you did.
If you didn’t receive a tax refund, that’s fine too. SonAriz Financial can help you if you would like to fund any of the above mentioned projects but do not have the cash needed for them. Give us a call or contact us with whichever method on our contact page.