Tax season, for us, is usually one big moment when we pull together every piece of paper, e-receipt, expense sheet (read: anything with numbers scribbled on it) and wonder what in the world we did before Turbo Tax. Whether you prepared your taxes yourself (whoo hoo!), pawned that duty off on an accountant (equally smart, by the way), or convinced your father to take one for the team, here’s something we can all agree on: that return is a gift. Amen? Amen.
In years past, both Chan and I have blown our refunds on ridiculous things, but now, we’re older, wiser, and have experienced that perils of being broke phi broke. But, let’s be honest: We’re just like you. We want to live our best lives. Not classified by material items, but lives filled with amazing travel opportunities, fleeky 401Ks, paid off credit cards, more financial freedom, and *gasp* a savings account we can hang our sneakers on.
While there are no super easy answers as to how to make your money grow, with just a little bit of knowledge, planning, and intention, you can make your tax return work for you and your future. So, in an effort to help you (and help ourselves) be accountable for making better adulting decisions, here are 5 ways we’re planning on beasting our tax return.
Invest In Your Future
Wanna maximize your tax refund? Invest in human capital. That is, invest in yourself.
You are your biggest income-producing asset. Your expertise, talent, experience, work ethic and your side hustle all offer potential. And, unlike stock market returns and interest rates, you can influence your own rate of return by improving your value either in training or by making the necessary investments to turn that side-hustle into income generation.
Whether you use your tax refund to pay for online training, tuition, an informational conference, membership in a professional organization or business start up costs, it’s an investment that can pay off for years to come.
Play The Market
Investing is REALLY important. While both of us are a little intimidated by sticking our money in volatile stocks, we both know that as we get older it’s imperative that we diversify our assets in order to live that life we dream about. Basically, we’re trying to make sure our 50-year old self is sitting pretty. According to financial adviser and SoFi’s president of wealth, John Foley, start with the free money - bka: your 401(k).
“If your company has a 401(k) plan, one thing that is a no-brainer is if they have a matching program. Many companies will match your contribution for a 401(k), sometimes dollar for dollar. If they do match your contributions, that’s basically a guaranteed return. You really should take advantage of that. You can’t just take your tax return and put it in, but make your 401(k) contributions by reducing your paycheck, so if you make a deduction and that will eat into money that you need to live, set your tax return aside to cover those expenses.”
Next up, an IRA (Individual Retirement Account) will be your best bud when it comes time to live your best life.
“If you put $5,500 in an IRA (Individual Retirement Account) starting when you’re 25, and when you get the typical rate of return—about 7%—and continue putting money in for 30 years, you’re going to have over $1 million. If you start when you’re 35, you’re going to have to put more in or you’re going to end up with a lot less. Put a lump sum like a tax return in first just to get started, and then be disciplined and put a little bit in every month after that—then you’re in a great place.”
What are some ways you used your refund (or are planning to use your refund) to better yourself? Let us know in the comments below!
Brit & Chan "Fit Chicks"