Wise Ways to Invest Your Tax Refund

Did you get a tax refund this year? You are not alone. Many Americans love getting a tax refund each year. A tax refund is the amount of money you over pay in taxes in each year. However, a tax refund is just another way to help the government make money. The money each taxpayer pays during the year is placed in a high interest bearing account and the government keeps the interest. The money given in a tax refund is small compared to the money the government earns each year from the millions of taxpayers in America.

There are only a few instances when you should overpay your taxes; if you want to use the extra money to pay down debt during the year or if you believe you will owe taxes at the end of the year. If you work hard all year long, why do you wait until the end of the year to get back money you earned? Get your money upfront by adjusting your tax withholdings. Consult an accountant to make sure do not end up owning money at the end of the year.

If you are struggling to pay bills or need to get out of debt your tax refund can be a lifesaver. However, it is up to you to determine how to spend it. If you do not come from a wealthy family, you are the only one you can depend on so make wise choices with your money because no one knows what the future holds. It is easy to get in debt and stay in debt, swipe that check card or credit card and ignore the bills. It takes courage to look at your situation and make a decision to do better.

I was $19,000 in credit card debt after graduating college earning $21,000 a year at my first job. I lost my job and was unable to make the minimum monthly payments. I was hired for another job but it took me four years to pay off all of my debt. It was the hardest four years of my life but I learned valuable lessons that a bankruptcy lawyer, credit counselor or financial advisor could teach me. I learned the hard way and those lessons were never forgotten. Remember what your grandparents said and save for a rainy day. Here are four ways to use your tax refund wisely.

Invest $500

·       Buy a mutual fund, some allow you to start with as little as $50 a month

·       Open a discount brokerage account and buy individual shares

• Open an IRA with a low expense ratio under 1%
• Open a CD, higher interest rates can be found with online banks or longer CD terms (1-5 years)
• Open an online high interest money market account that has no fees or minimum balances
• Open an online interest checking account that earns 2% or more
• Participate in a DRIP (dividend reinvestment program) to buy stock directly from companies and automatically reinvest the dividends earned from the stock
• Join an investing club, they usually charge a membership or annual fee to join

·       Pay down debt

·       Start a savings account to cover monthly bills and expenses from 9-12 months

Invest $1,000

·       Start a savings account to cover monthly bills and expenses from 9-12 months

• Invest in an exchange traded fund or buy individual shares of stock
• Buy municipal bonds with at least BBB rating

·       Buy 100 shares of a stock priced at less than $10 or buy 50 shares of a stock priced at less than $20, etc.

·       Invest in a mutual fund

·       Contribute to your retirement account

Invest $5,000

• Open a 529 college savings plan
• Invest in a low-to-medium-risk mutual fund
• Invest the maximum in a Roth IRA ($5,000 per year)
• Buy municipal bonds with at least BBB rating

Invest $10,000

• Buy a franchise
• Invest in a profitable business
• Start a business
• Buy real estate

16 Superb Investing Strategies for Retirement

 

 

Many people ask for advice from friends, co-workers, family members, strangers and their financial planners about how to invest.  Many people panicked during the last government shutdown and volatile market fluctuations. Many were forced to spend all or a large portion of their retirement money or moved their retirement money to a savings account or CD.  

This was the wrong move to make. You must keep your money invested during the ups and downs of the stock market.

Every investor has different financial goals and objectives and should work with a financial planner to assist with meeting your goals.  Financial planners have expertise in how to survive the ups and downs of the stock market and can provide the best advice and if and when you should move your money. Here are sixteen superb investing strategies for retirement.

1. Get your finances in order - Pay down debt. Create an emergency fund 9-12 months. Get insurance. Set financial goals, set a retirement date. Plan for your estate. This will free up cash that can be used for investing. 
2. Define a strategy - Determine the goals you want to achieve. Identify whether you want to invest in small caps or big cap stocks, emerging stocks, etc. 
3. Research - Research the stock price history, executives, and annual report. Learn everything about the company before you invest.
4. Create a plan - Develop a clear plan where you are now and where you want to be financially. 
5. Identify your style - Take time to develop your personal investment philosophy.
6. Mentor - Get an investing mentor. Get advice from someone in your social circle who has an extensive financial portfolio you would like to emanate.
7. Asset Allocation - Decide on an asset allocation to help balance risk and reward by allocating a portfolio’s assets according to an individual's goals, risk tolerance and investment outlook.
8. Diversify - A well-diversified portfolio limits your exposure to risks so that your investments have time to earn real gains.
9. Companies - Invest in well-established companies that have name and brand recognition.
10. Risk tolerance - Identify your willingness to lose money.
11. Patience level - Identify your patience level will determine if you are able to wait for returns to generate income based on long-term growth.
12. Fees - Research the fees that you will be charged when investing such as commissions, management fees, cost of operating the fund, etc. 
13. Buy low, sell high – Buy when the market is experiencing turmoil. When the market bounces back, you will have achieved great gains.
14. Review - Review your portfolio each time you receive a statement. You asset allocations may have changed and you may have experienced more risk than anticipated. This can be corrected by rebalancing your portfolio.
15. Dollar Cost Averaging – Buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. This results in buying shares for a cheaper “average” price and earn a greater return than if you buy a large amount of shares at a single price.
16. Automatic Investing Plans – Online brokers allow customers to buy individual stock or money market accounts. There is no minimum investment and you can invest any amount.

9 Excellent Reasons to Invest

Investing your money is a great way to plan for your future including retirement, college education for your children of other investment opportunities such as starting a business. Investing allows your money to grow over time using compound interest. Well managed investment plans allow you to live the life you want and deserve. Investing allows your money to grow tax deferred. Investing outperforms inflation and will provide you with steady income when you retire. 

Many people ask for advice from friends, co-workers, family members, strangers and their financial planners about what they should do with their investments or retirement plan. Every investor has different financial goals and objectives and should work with a financial planner to develop a plan to assist with meeting those goals.  

Financial planners have expertise in how to survive the ups and downs of the stock market and can provide the best advice and if and when you should move your money.  Here are 9 excellent reasons to start investing your money.

Benefits of investing

1. Reduces stress, anxiety, fear, depression related to your future. 
2. Allows you to develop a solid financial plan so you can focus on other things such as spending time with family and friends and maintaining good health.
3. Helps secure your future and earn income outside of your job.
4. Generates income.
5. Prepares you for retirement.
6. Helps you manage your money.
7. The more you save the more you earn.
8. Creates generational wealth.
9. The future is not promised, you must prepare for the unexpected.

When to invest

1. As soon as you start working as an adult or earlier.  If your company does not offer a retirement plan open your own IRA. You will need at least 30 years of investing (depending on your salary) to have enough money for retirement.
2. If you plan on getting married.
3. If you plan to have children.

How to prepare for investment

1. If you want to retire by age 65 or sooner.
2. Pay down debt.
3. Create an emergency fund 9-12 months.
4. Get adequate insurance life, health, disability and long-term care insurance.
5. Consult a financial advisor to help you set financial goals, set a retirement date, decide where you want to live and the lifestyle you want to have.
6. Plan for your estate (will, trust, advanced directive).
7. Become a homeowner.

Where should you invest your money?

1. Diversify
2. Mutual funds
3. Individual stocks
4. Bonds
5. ROTH IRA
6. DRIPS (Dividend reinvestment plan)
7. Options
8. Futures