Americans love spending their money. The high we get from buying a flat-screen tv, iPad or new pair of shoes is shocking. This phenomenon creates a spend vs save competition not only for our paychecks, but also for the biggest single payment most Americans receive: their tax refund. The result is most Americans squandering their tax refund on material possessions and missing a great opportunity to create long-term wealth.
There is a trick that can prevent you from consuming your newly received funds (but still giving you that purchase high you require). The trick is to buy something that will make you wealthier.
Here are 10 things you can “buy” that will increase your wealth.
- Buy your debt. I know, I know, I tricked you…You knew this was going to be the first thing you have to do with your tax refund, sorry. Think about this tho, by decreasing your interest expense you’re actually increasing your net earnings for the year. “Earn” an extra 10 or 15 % this year by paying off your debt.
- Buy a ROTH IRA. Opening an IRA account is more than just saving. Under a ROTH IRA your “after-tax” tax refund grows tax free. Once you reach age 65, you’re eligible to withdraw all funds without paying tax on the gains. The tax benefits make this a great account for new investors to learn about investing, potentially free from tax consequences.
- Buy home efficiency. Within the last five to ten years some fields have made giant leaps in efficiency. Energy Star appliances, tank-less water heaters, insulation and solar panels are just a few household purchases that could decrease your energy costs and whose savings could actually pay for themselves.
- Buy a healthier you. Wanting to join the gym or the country club, but just can’t justify it with your current budget? Rather than blowing your refund on electronics or a vacation, prepay 6 months in advance for a membership . Keep in mind that a healthier your is a less expensive you – investing in your health now will financially benefit you down the road.
- Buy more schooling. How satisfied would you feel by using your refund to sign up for online classes or that certification class you’ve been putting off? Investing in yourself pays great dividends (financially and mentally) and is one of the 7 Ways to Be Seen as an Expert in Your Industry. What is a form of education you could buy this year?
- Buy something in scarce supply. DISCLAIMER: This is not for everyone. If you must make a material purchase with your refund, buy something that is going to hold its value. For those of you with an expertise in niche products, investing in a scarce product may be a good investment. Collectible guns, classic cars and stamps are examples of products that, if properly researched, can be enjoyed by their owner and may hold their value. Example of something NOT in scare supply: Diamonds.
- Buy someone a better life. While using your refund to get involved in a charity may not make you wealthier on paper, it will make your wealthier as a person. There are plenty of great organization out there like Habitat for Humanity, Meals on Wheels, and United Way. Buying someone a better life may be the best purchase you make all year.
- Buy a 529 College Savings Account. Another form of savings, a 529 is a tax deferred account which may be used for college expenses. As long as the proceeds are used for schooling, the refund you invest now will grow tax free and may be used by beneficiaries of your choosing in the future.
What were you planning on using your tax refund for? Are you bettering yourself or not? We’d love to hear about how you’re spending your refund in the comments below.
Tags: Decrease Debt
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