Turn Your Tax Refund Into Profit

By Brandi Savitt – March 3, 2011

Use Your Refund to Your Best Advantage

The deadline for submitting your 2010 tax return is just around the corner, and if you are an early filer, those refund checks are already starting to roll in! Instead of blowing your refund cash on something frivolous, check out financial expert Galia Gichon’s tips on how to turn those dollars into a proactive plan for your profitable future!

Pay Off Your Credit Card Debt

Using your refund to lower the amount of money that you owe is a fantastic way to strengthen your financial footing.  However, don’t use your entire refund to pay off your debt. Chances are you got into debt because you had no safety net in the first place- so deposit a portion of your refund in your savings account as well.    If you have student loans, pay a little extra towards them as well.  Even though it’s considered good debt, and the rates are low, why not lower your liabilities and focus on raising your assets!

Contribute to Your ROTH IRA

If you don’t have a retirement account, and you don’t have the $2,500 minimum needed for most mutual funds, you can open a Roth IRA  for just $75 per month at T. Rowe Price.  Keep in mind, you will have to commit to contributing to it automatically every month.  But remember, the more you save while you’re young, the more money you’ll earn in compounding interest over time!

Beef Up Your Savings

Do you have 6 months of expenses saved? Well, you should. Why not use your refund to get your savings account working for you!

Add an Extra Payment to your Mortgage

On a $250,000 30-year mortgage with a 5% interest rate, paying down an extra mortgage payment a year will shorten your mortgage by 5 years and save you almost $ 41,000 in interest.  Not a bad use of some unexpected cash!

Invest in Your Career

If you know that your career needs a boost, this IS the time to pay for continuing education classes, additional training or another degree.  Investing in yourself by expanding or sharping your skills, will always pay off in the end!

Contribute to a 529 College Fund

Today, the average annual price of college is $12,000 for a public university and $35,000 for a private school.  Get ahead of the game, and start saving now.  Can you imagine what it will cost by the time your little one is ready for college?!

Donate to your Favorite Charity

Most charities tend to do their big drives at the end of the year, but they need donations all year long.  Consider using your refund for a good cause, and get a tax deduction when you file next year!

Decisions, Decisions

We know, we know – that Marc Jacobs bag has been calling out to you for months now!  And while you know we love a great bag as much as the next girl, we think it’s a good idea to consider alternative options before that tax refund check arrives in your mailbox.  No matter how cute of a bag it is, remember it’s way more fashionable to be financially secure!

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2 Responses to “Turn Your Tax Refund Into Profit”

  1. suki says:

    If your mortgage is under water, there’s no point in paying it early. ;) You’re better off using the money to pay off other things… or contribute to retirement. Otherwise, great tips!

  2. [...] you one of those super organized tax payers who have already filed, and now are dreaming about what you’re going to do with this year’s refund?  Or are you like the tens of thousands of us procrastinators who still haven’t done our taxes [...]

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