If you're expecting a refund from the IRS this year, resist the temptation to splurge on luxuries and instead invest that money in ways that will pay off in the long run. Here are five smart ideas to put that tax refund to good use:
Open an account for emergencies. Any financial advisor will tell you that an Emergency Fund is one of the most important steps in building financial security. Get peace of mind knowing you have cash for emergencies or unexpected situations by opening a special account with your tax refund. Advisors typically recommend to build a fund that covers three months of your salary.
Pay off those credit cards! If you have credit card debt, paying it off is a smart way to use your tax refund. If your refund doesn’t cover the entire outstanding balance, roll your remaining debt to a credit card with a lower interest rate or look for a lower-interest debt consolidation loan.
Invest in yourself. Your skill set is your greatest commodity in revenue generation, so use your refund for training, education, conferences and other programs to help build your talents and sharpen your strengths.
Get energy efficient. Use that extra cash to make your home energy efficient to save money over time on electrical, heating and water bills. For example, by adding fiberglass attic insulation, you’ll recoup 107% of the $1,343 average cost for installation. Plus, energy efficient homes help with a home’s resale value.
Invest in your community. Giving to charitable causes in your community that you care about not only helps those in need, but makes you feel good about yourself and helps improve your community. Think about using a portion of your refund to make a difference in someone’s life for the ultimate gift to yourself.
The holidays are the time of giving and when many people choose to help those in need by making donations to favorite charities. Did you know that these contributions can actually reap benefits for you?
You’ve probably heard the phrase “write off” or “deductible expense” but many people don’t fully understand what that means. Simply put, the purpose of tax deductions is to decrease your taxable income, thus decreasing the amount of tax you owe to the federal government.
Any charitable contribution is tax deductible up to 50 percent of your income. And you can get tax savings with non-cash donations as well. Eligible deductions include the purchase of a new coat for a coat drive or food for a food drive, or making a donation to Goodwill, Salvation Army or other charities that accept gently used items. Follow these tips to make the most of your charitable deductions:
Source: Forbes.com and CNBC.com
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