3 Ideas for Investing your Income Tax Refund

It’s that time of year again and most of us have either already received or are impatiently waiting for our income tax refunds. If you’re anything like me, that money might be burning a hole in your pocket before it even hits your bank account.  

To avoid blowing your entire refund within a couple of weeks, it’s important to make a plan for your money.  Think about ways to invest instead of just spending it.

For most people, an income tax refund is a once a year opportunity to make a financial flip and make real progress towards breaking the check to check cycle.  

Let’s talk about how to make that happen.

We need to gain an understanding of two simple concepts before we even talk about investing ideas.

First, of all, what is investing?  Simply put, investing is the act of putting money towards some endeavor or venture such as a business, the stock market, real estate or a project, with the assumption and expectation that you’ll make a profit in return.

The second thing we need to understand is return on investment.  Return on investment is literally the profit you make on your investment.  

So the idea is to make wise investment decisions that will yield high returns.  

Now that we’ve gotten the fundamentals laid out, let’s dive into some easy ways to invest your income tax refund:

1. Pay Down Debt

If this isn’t the most obvious idea EVER.  

Use your tax money to make bigger payments on high interest credit cards, your car loan or any other debts you have with interest and monthly payments.  The idea is to free up more income by minimizing the payments going out on a monthly basis.  If you’re able to, pay off one or two accounts completely.

If you make some hefty payments you save money on interest down the road, if you’re able to pay them off in full, you save on the interest AND monthly payment altogether. Both scenarios can have a positive impact on your credit score.  Either way, you’ll come out with a profit and a great return on investment.  

2.  Beef up your emergency fund

Nothing sucks more than car trouble or an unexpected trip to the emergency room when you’re literally living check to check and have nothing saved for a rainy day.

Newsflash : SHIT HAPPENS… and it doesn’t care if we have an emergency fund or not.  None of us are exempt.

Taking this opportunity to set aside a chunk of money will save you a ton of stress down the road.  And we all know peace of mind is the greatest return on investment of all.  It’s a lot easier to get through unexpected emergencies when you don’t have to worry about how you’re going to pay the bill.

Take a few hundred dollars and set up an interest bearing savings account.  The goal is to save at least 3 months of income so set up an additional direct deposit from your paycheck to keep funding your account!  

3. Start a Business

In today’s world, you can literally start a business for under $100.  You have options like coaching and consulting in which people pay you for what you know,  there’s dropshipping if you want to sell merchandise, we have Paypal, Venmo and the CASH app for payments.  

Your tax refund is a golden opportunity to invest in your ideas and plant the seeds of a successful business.  Start by putting together a plan and then build a website and launch your business.  

The fact of the matter is that the cost of doing business is DOWN my friend, stop making excuses and start making you some money!! Ask yourself what people want, what people spend their money on and find a way to sell it to them.

Bottom line, focus on investing NOT spending so you can get a return on your return!!

Check to Check is for the Birds : 5 Ways to Break the Cycle

62% of Americans are living paycheck to paycheck with no money saved for emergencies according to Market Watch. SIXTY TWO PERCENT!!

The sad truth is that the majority of us are financially devastated the moment we have an unexpected expense.  One car repair or emergency room visit and we have to turn to credit cards or borrowing money.  It’s nothing short of stressful to go through life hoping nothing goes wrong, but knowing that eventually, something will, and it will likely cost money we just don’t have.

Most people accept the paycheck to paycheck lifestyle as a miserable reality of American adulthood but let me be the first to tell you, it’s a choice.  Now I’m not gonna lie and tell you it’s gonna be EASY to break the cycle BUT it can be done.  I know it can seem impossible, because I’m in the process of breaking the cycle RIGHT NOW but I also know that it’s simple a matter of commitment, educating yourself, and rejecting this notion that true financial freedom is unattainable.  

So how do you do it?  

Of course everyone’s situation is unique but here’s 5 steps to get you started on building your plan to escaping the check to check life:

1.  Recognize and Realize

The first thing you need to do is wake up and realize that you’re not prepared for an emergency and you need to accept that it's no one’s fault other than your own.  I’m not giving you permission to beat yourself up or cry over spilled milk but you do need to give yourself some perspective and take some responsibility before you can make changes.  Once you recognize how your financial choices directly affect your results, you’ll be more aware of  your power to change your situation by making different choices.

An easy way to get real with yourself about your money and your choices with your money is to track your spending.  Whatever works for you, find a way to track every dime you make and spend for 30 days.  You may want to keep a written journal, keep receipts or use your bank statement online but be sure to keep this as detailed as you possibly can.  After 30 days, look over your spending for trends, analyze where you’re spending your money and you’ll finally be AWARE of where all that money is going.   

2.  Downsize

Now that you’ve assessed your spending for an average month, you can find places to cut back.  We all have little pockets in our budgets where we could save a few dollars with a bit of research and effort.

Take your cell phone or cable bill for example.  Look over the bills and ask yourself what features you’re paying for that you’re not even using?  Often we ignore that extra $6.99 or $9.99 a month because it doesn’t seem like much, but it all adds up. Every penny counts!  Your utility bills are another culprit.  The majority of us pay our electricity, water and gas bills without even checking the usage and if you’re not paying attention, you could be throwing money right out the window by choosing not to live efficiently.  Small things like taking shorter showers, unpluggin computers and other electronic devices at night and turning off lights when you’re not using them are all ridiculously easy ways to save a few dollars on utility bills.  Living a more energy efficient life not only contributes to a healthy planet, it helps keep those pockets healthy as well.  

Ever thought about refinancing your car? Get a better interest rate and save money with a lower car note.

If you haven’t gotten the idea yet, I’m literally recommending you assess every single one of your bills and ask yourself how you can reduce it.  

3.  Pretend

I love this one, simply pretend you make less than you actually earn.  Base your expenses on an amount less than your salary and save and invest the rest.  

This requires some level of discipline but there are ways to make it easier.   I have my direct deposit set to automatically put a certain amount into savings so that I never even see the full amount of my paycheck in my bank account.

 You WILL be tempted to dip into savings when your money is getting low, but remind yourself that the only way to break the paycheck to paycheck cycle is to stay consistent and committed. Each time you give in to spending unnecessarily from your saving, you are one step further from escaping.

4.  The ‘Fun’ Budget

I think one of the reasons people fail at keeping their budgets is that we eliminate so many of the things that make us smile as ‘unnecessary expenses’.  I argue that it’s just as important that we budget for fun stuff as it is that we budget for bills.  

By building weekend outings and dinner dates into the budget you’ll force yourself to assess what you’re spending on leisure and if you’re smart, you’ll find ways to have more fun for less money.   Find deals on apps like Groupon and Scoutmob . Determine how much you can afford to allot for ‘fun stuff’ in your budget and find things to do that fit into that range.

Caveat: Depending on your particular financial situation, you might need to work your way up to a fun budget and find yourself some FREE ways to have fun.  (Creative Loafing has an entire page dedicated to 'Fun+Free Shit'). The fun budget may be a reward for you once you’ve saved a certain amount.

5.  Job Number Two

The average millionaire has 7 streams of income.  Even if your goal isn’t to be a millionaire, that fact should let you know that in order to at least keep your head above water, you need to be thinking of 2 or 3 different ways to make money.  You CANNOT depend on your job alone….it’s apparently not enough or you wouldn't be living check to check, right?  

Get creative and think outside the box so you can find something that will work with your schedule and bring in some extra income. Consider work from home opportunities, night and weekend gigs, seasonal positions or even extra work you can pick up on your current job.  The bottom line is that bringing in more cash is the fastest way to ending the cycle.

Hopefully these 5 steps will get you thinking about a complete plan of escape from the stress of the check to check cycle. Remember that you are the only person who can change your situation and make the choices to put yourself in a position to make more and spend less.  

xoxo-

Coach Boop

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