Being Wise with Your Windfall: Tips for Using Your Tax Refund

coins-currency-investment-insuranceIf you’re expecting a hefty tax refund this year, you may, like many people, intend to have some fun with your windfall. After all, it’s your money and you worked hard for it. There’s nothing wrong with heading out for some much-needed vacation time or buying a big gas grill for those summer cookouts. As tempting as that may sound, before you buy anything, consider the benefits of using a tax refund to better your financial situation.

Savings

If you’re among the many Americans who lack a rainy-day fund, think about setting all or part of your refund aside in an interest-bearing savings account. You never know when the transmission in your car may give out or an aging roof might start to leak. These are costly repairs, and the average American is unprepared for them; in fact, just 39 percent of Americans are capable of covering an emergency costing $1,000 or more. If you lack at least three months worth of emergency savings, that tax refund may serve you better as an emergency financial reserve.

If your roof could use some work, repairing it is an excellent use for a tax refund. You’ll head off more serious problems resulting from neglect somewhere down the line. But be diligent in looking for a qualified roofing contractor, and ask yourself several questions to determine what, exactly, you need. Check with the Better Business Bureau to make sure your contractor is accredited, and check out the BBB website for complaints or any disputes or scams a company may have been involved in, as well as tips regarding what to look out for.

Pay Down Debt

Debt is a fact of life for most Americans. If you struggle with credit card debt or are behind on the mortgage, your refund can help you out. Paying off debt is a smart move because the high-interest merry-go-round can be very hard to get off when you’re just managing it by paying the minimum every month. That can take you years to pay off even a moderate amount.

College Savings

According to CNN Money, most Americans can expect to pay about $57,000 for a degree at a public college, and more than $100,000 at a private institution. That’s a lot of money for anyone. Why not use your refund to open a 529 or Coverdell education savings account? And investing in your state’s 529 plan may result in a nice state income tax deduction. However, beware of using the money for unqualified purposes, which can earn you a 10 percent penalty.

Roth IRA

A Roth IRA lets you stash money away that becomes tax-free after age 59.5 as long as it’s been open for at least five years. You can contribute to it as you wish and withdraw the sum of your contributions without being hit with a tax or penalty. Your Roth earnings can be used tax-free for education expenses or for a first-time home purchase.

Invest in Yourself

You are your own most valuable resource, your best hope for earning and growing your assets. Improve your ability to do that by investing in training, additional education, or by joining a professional association. It’s a good way to sharpen your skill set, pick up new knowledge, and make valuable new professional connections. The more you can improve yourself, the more valuable you’ll be to an employer or to clients.

Travel

Speaking of self-improvement, are you aware that travel broadens perspective and helps you keep problems, challenges, failures, and successes in their proper context? Think about spending a portion of your refund to go someplace new, a destination that’s always interested you.

Think of a tax refund as an opportunity, an annual chance to improve your financial situation and personal prospects. Think carefully before heading off to the Jacuzzi store or ordering a season football ticket package. By being strategic with your financial prospects, you can put yourself in a much better position to acquire those “toys” you really want and achieve financial security.

Advertisements

Living Your Best Frugal Life: Tips for Baby Boomers

Baby Boomers

For many Americans, finding a way to do all the things they want without breaking the bank is a struggle. Approaching retirement often means getting the freedom to travel, spend time with family members, or try something new—but doing any of those things on a budget can cause stress and anxiety. It can be difficult to find a happy medium when it comes to getting what you want and saving money nowadays, making it harder for Baby Boomers to live their best life.

 

Fortunately, there are ways you can travel and have new experiences in post-retirement while simultaneously saving money. The key is to get creative and do some research before making any plans, as this can help you stay on track while you’re enjoying yourself. For instance, you might hire someone to help with your lawn work, grocery shopping, and errands, or home improvement projects, giving you the time and energy to actually enjoy your life. The key is to take a little time to explore your options to ensure you’re getting the best deal. Living frugally doesn’t mean that you have to give up the things you really want. Keep reading for more tips on how to live it up without breaking the bank.

 

Start early

 

The best way to save money when traveling is to plan early. If you want to book a cruise, start your search at least six months in advance. This will help you find the best deal, as there will be many options available without a lot of demand. You can also wait until a couple of weeks before the cruise date, as many companies will offer steep discounts to move unsold tickets.

 

Start local first

 

Once they retire, many people want to see the world — or at least the US. However, you can save money by thinking a little more locally than that. Have you explored your state? Do you know what treasures can be found in your own county? Look for adventures close to home first, or head to a neighboring state to see what you can find. You might be surprised to find there are plenty of getaway opportunities you haven’t even considered. Plus, road trips are fun—and they’re far less expensive than flying somewhere.

 

Look for deals online

 

Online deals are the cornerstone of simple travel, so check out several websites to get the best deal on hotels, airfare, and entertainment when you’re ready to take a trip. This also applies to everyday shopping, as there are always coupon codes and other discounts to be found if you know where to look. Check out the travel section of RetailMeNot.com for great savings at thousands of online stores. Also, keep in mind that many travel companies offer senior discounts for everything from restaurants and entertainment to tourist attractions and transportation—so those are definitely worth looking into.

 

Buy used when you can

 

Many retirees want to treat themselves a bit, and you can still do that without spending a ton of money. Buying used can help you save on big-ticket items such as a car, a new set of golf clubs, or a television without compromising what you really want. You can try sites like Craigslist or Facebook Marketplace to find great deals on the items you’ve been looking for. Do a little homework and ensure you’re getting what you paid for; go here for a list of the best used sites.

 

Living the life you’ve always wanted doesn’t have to come with a hefty price tag. For many seniors, finding a way to do all the things they want during retirement is simply a matter of getting creative and asking for help from friends and loved ones. Think outside the box when it comes to your spending. With a good plan, you can make your retirement years everything you want them to be.