April 15th is fast approaching, and that means the dreaded task
of paying taxes. For most of us, though, Uncle Sam has been
skimming off the top of our paycheck all year, and it’s time
for him to give us what we deserve: Our Tax Refund!
It’s very tempting to blow your refund on something fun like a
vacation or the down-payment on the new car you’ve had your eye
on. Before you go off doing something unwise with your money,
check out these other ideas for what to do with your tax refund.
This year, make sure that check you get in the mail doesn't go to
waste. No matter how large or small your refund is, here are 5
ways to make sure every cent of your tax refund goes as far as
possible:
1. Earn Interest in an Online Bank Account
You'd be surprised how much interest you can earn when you have
your money in an account with a high Annual Percentage Yield.
Several online banks are offering high interest rates to attract
customers. Average savings accounts will usually earn you about
0.5% interest. The Orange Account by ING Direct
( http://www.OrangeAccount.com ), earns you 2.60% on every dollar
in your account. The best part is that there are no fees, no
minimum deposits to start, and opening an account is as easy as
linking it to your current checking account.
If you put your refund check in this type of account, and keep at
it, you can earn a lot of interest over the next year. Think of
what that could buy!
2. Pay off Your Mortgage
If you haven't looked at your mortgage statement recently, you
probably should. If you're anywhere near the first 5-10 years of
your loan, chances are good that more than 75% of your monthly
mortgage payment goes towards interest. You are essentially
throwing every cent of that money away. On the other hand, 100%
of any payments you make above and beyond the required payment
goes straight to your principle, and can cut years off your
mortgage. Paying an extra $2000 now can save you more than
$10,000 in the long run.
Every $1000 extra dollars you put towards your mortgage payment
this month can save you as much as $50-$100/month starting right
now. Think of what you could do with that kind of money.
3. Open an IRA
If you don't already have an IRA, you need to open one. If not,
you are missing out on earning tax-free interest from now until
you retire. Recently, restrictions on IRAs have been lessened,
making it even easier to open an IRA. Almost any bank, or
investment institution can open one for you for free, and you
can apply any payments made before April 15th to the previous
year, giving you a whole year's head start. All contributions
to a regular IRA are 100% tax-deductible, and nearly everyone
qualifies to open one. To find out more about the different
types of IRAs, and how to get started, go to:
http://www.kaspercpa.com/rothira.htm
Keep in mind that you won’t be able to withdraw the money until
you retire without incurring large penalties. IRAs are a
fantastic way to save for retirement, but don’t put money into
it that you might need later.
4. Pay off all of your credit cards
The worst type of debt you can possibly have is credit card debt,
so if you carry a balance on any credit cards, please take this
advice: Pay It Off Now!
Paying the minimum balance on your credit cards every month can
cause all purchases made on the cards to end up costing five
times as much as the original price. And unlike a home loan or
car loan, you aren't building any equity at all by using a credit
card. Of all the different types of debt you have, credit card
debt is by far the most important to pay off immediately. Take
your refund. Pay off every credit card. You won't regret it.
5. Invest in Stocks or Mutual Funds
Despite it's ups and downs, investing in the Stock Market has
proven to be one of the most reliable and profitable investments
a person can make. In the long term, the market always rises.
Over the past 50 years, even a person that invested all of
their money right before every market crash, would come out
significantly ahead of where he started. The internet has made
investing easier than ever. You can open an account in minutes,
transfer money from your checking account in a matter of hours,
and get trade confirmations in just seconds. If the fast-paced
world of buying and selling securities isn't for you, you can put
your money in a mutual fund, which have proven to be great long-
term investments. You can do all of these things with Ameritrade
( http://www.ameritrade.com ), one of the largest and easiest-to-
use online brokerage firms.
It's always tempting to splurge on something with your tax
refund, but the best way to reward yourself is to prevent hassles
down the road by being smart with your money today. Follow these
tips, and you'll be on your way to a prosperous future!
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