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!!