Four Reasons you Should Invest your Tax Return (and How to Do It!)

It’s tax season, and we all know what that means! Soon, the IRS will be doling out refund checks to those of us lucky or foresighted enough to have overpaid on our government debt for the year. If you’re like most American taxpayers, you’ve probably got a pretty good idea what it is you’re going to be spending that tax return on, and it isn’t likely to be entirely for the best, is it? You might be thinking about a new car, a television with all the bells and whistles, or even a trip to the grocery store. While these things might be necessities in one fashion or another, they’re far from the best way to spend a windfall of cash. These five reasons for investing your tax return might just make you think twice about refresh rates for televisions and optional extras on a new car.

What NOT to Buy with Your Tax Refund!

First off, investing windfall money such as is often the case with tax returns tends to boost the amount you’re receiving. With a little patience, putting your return into a good stock fund can reap you rewards of (historically) about 10%. Done over the course of a working lifetime, this can amount to a tidy little piece of change that you can use to enjoy your retirement that much more. If you’re looking for a good investment to put your money into, then consider the benefits of an IRA account, either Roth or Traditional, paired with a stock index fund. This is the easiest way to invest your tax return, tucked tightly away for retirement, and with the best possible outcome and return. 

Second, consider investing in your own financial well-being. More than just putting money into an IRA account and watching it grow, think of a cash investment in your finances the best way to secure your financial freedom. Do it like this: Determine what your most expensive loans or credit cards are, and then apply your tax refund to those balances. If you can pay one off, then so much the better! You’ll increase your overall net worth, and as long as you don’t immediately go out and rack up a bunch more credit card debts, you’ll be more able to obtain low-interest financing rates for things like mortgages and car loans. You’ll even qualify for low-rate credit cards! The effect is cumulative, so the more you invest in your financial well-being, the more you’ll save over time! To do this the right way, make a commitment to yourself to pay off those debts, and put the money you receive toward those debts right away, before you get the chance to spend it on something you don’t really need!

Third, invest in your health. It might sound a bit ridiculous, but if you really think about it, particularly as you age, health becomes the number one expense you’ll incur. Living a sedentary lifestyle contributes to obesity, diabetes, a host of cancers, and even decreased mental functions. Do you really want to spend your life that way? Of course not! Invest in the purchase of something that will help you get and stay healthy! Think along the lines of a bicycle, gym membership (that you can commit to and use) or something else that will get you outside and above all, moving! Don’t think you have time? You might be surprised what just 15 minutes per day will do!

You may not be ready to chuck your entire tax return at an investment right now, but if you really think about it, you might just find yourself later on wishing that you had!