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May 2008 |
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Don't Spend Your Tax Return, Invest ItHere Are a Few Smart Ideas Toward a Brighter Future Let's face it. Except for a few really diligent budget hawks out there, your tax return can be considered "extra money." Oh sure, you probably have it already spent on a car repair or, worse, a new TV that will depreciate the moment you take it out of the box. But let us try to persuade you to put it toward something that will pay you back for years to come. Here are five sensible ideas: 1 Kickstart your IRA! Whether you choose the Roth IRA, where your money grows tax deferred and your withdrawals are tax free or you go with the traditional IRA which will likely give you a tax break right now, opening an IRA is like spinach for your financial health. And for those who don't like eating spinach, rest assured opening an IRA is a lot easier. Visit almost any investment house in person or online and tell them you want to open an IRA. Fill out a form and you're on the path to financial freedom. 2 Buy a CD. With interest rates rising, certificates of deposit are looking better and better. A CD is essentially a loan from you to the bank. They keep your money for an agreed upon time period and pay you interest for the privilege. The smart play when buying a CD is to shop around. You can find and buy CDs worldwide online. Just type "CD rates" into a search engine and all sorts of delicious interest rates will come up. Just make sure you're prepared to part with your money for whatever term you choose, six months, 12-months, 18-months etc. Then watch your savings grow. 3 Start your emergency fund. You could buy a new mattress with your tax return. Or, you could buy something that will really help you sleep at night — an emergency fund. About 60 million Americans report episodes of insomnia nowadays, and last year America's personal savings rated dipped into negative territory for the first time since the Great Depression. Could they be related? An emergency fund means you worry less about the furnace, the roof, the car, losing your job, your finances and so on. Find a money market account that offers you a competitive rate and check writing and start stacking some savings. 4 Pay off that credit card. If you are carrying a credit card balance, by all means, pay it off, and resolve to never pay a credit card finance charge again. Let your tax refund be the knockout blow and then instead of sending the credit card company 12-18% each month, send it to yourself. There's no better long term investment than paying off your credit card debt, saving yourself hundreds, thousands, and sometimes tens of thousands of dollars in interest. 5 Buy a bike! Seriously. If you've got an emergency fund and your credit card debt is paid off, then yes, Debt Matters is encouraging you to consume. If you want a bike and you're going to use a bike, then buy it. Look for a good used one in the classifieds. And make sure it "fits" you. Almost all of us need more exercise. Biking is more interesting than the gym because you can go different places. And if you ride it just one day a week to work, you'll cut your commuting costs by 20%. A bike can pay for itself in just a year and the cardiovascular benefits are priceless. Doesn't that sound like a good investment? |
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