tax refund

Tuesday’s Tip: Get Those Tax Breaks!

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Ok, so it’s not Tuesday. Forgive me. Let’s just call this one . . . Wednesday’s Wisdom.

With tax season in full swing, most people I know are busy gathering the necessary materials so they can file their income taxes. Some (like my hubby and I) are do-it-yourselfers and use computer software to guide us through it. Others meet with a tax professional who knows the “code” and can give advice on complicated situations. Whether you do your own taxes or have a professional deal with it, the goal is one and the same: get the biggest refund possible. In order to do that, it’s necessary to take advantage of the tax breaks that are out there for us. And with the April 15th deadline quickly approaching, it’s a good idea to find out what those breaks are. So, I’d like to share an article that I read highlighting some tax breaks that you may not have thought, or known, about that could have an impact on your tax refund. The article specifically gives hints for people at different stages of life, so keep that in mind as you read it. Not everything will apply to your particular situation, but hopefully you’ll be able to get a good idea or two. Click on the link to get started.

http://finance.yahoo.com/news/tax-breaks-every-life-stage-050001787.html

Good luck and happy filing!

Tuesday’s Tip: Invest for Your Future

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As the last post regarding what to do with your tax refund, I’d like to suggest beginning to set aside some money for you. I’m assuming that you’d rather not work until you’re 96, so now is the time to stash away some cash for your retirement. Some of you may think ‘Oh, I’m too old to start saving for retirement’, or ‘I can barely get by on a daily basis, how the heck am I going to save for the future?’. Well, guess what? It’s never too late. And if  you’re in a pickle, financially, then it’s time to fix up the engine so you can get behind the wheel and go where you’d like to go.

If you participate in a retirement savings program through your company, like a 401(k), good for you. That’s fantastic. But to be honest, I wouldn’t necessarily count on that as your sole source of income after you retire. In this day and age, you need to cast your net a little wider to ensure you don’t have to eat peanut butter and jelly for the rest of your life.

There are several different coffee cans to toss your spare pennies into, like bonds, CDs, mutual funds, stocks, money market accounts, IRAs, and such. (I’m not going to give you any kind of advice about which ones are performing well or suggest that you buy into any one fund or stock. I’m merely pointing out that you have options.) These types of investment opportunities are separate from a company-sponsored 401(k), so it’s up to you to decide how much money you want to invest – and then you make the deposits. You can do that monthly, quarterly, yearly – whenever you have some extra cash to throw at it. That’s why I suggest using your tax refund money to get you started. If you don’t need it, why not put it to good use? But let me throw in a word of caution: if you’re going to make this one of your priorities, make sure that you keep up with it. There’s no sense in opening an account if you’re never going to contribute to it.

If this sounds like something you’d be interested in doing, then hop on the computer and do a little research. Visit the websites of different investment firms in your area, find out what they have to offer, and then make an appointment. A professional financial planner can answer any questions you may have and will give you advice about the best places to put your hard-earned cash.

And just so you know – he or she will probably ask you what your goals (a.k.a. priorities) are in life. Maybe now would be a good time to brainstorm . . .

Tuesday’s Tip: Invest in Your Home

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If you own your home, you know that the projects seem to be never-ending. There’s always something that needs to be fixed, painted, or replaced. Things wear out. It happens. But the real problem comes when you have to scrounge up enough money from somewhere to buy a new water heater because your old one unexpectedly handed in its resignation all over your floor. The trick is to have some money on hand for The Unfortunate. You may not have a lot to spare, but earmarking some is certainly something to think about doing so you’re not panicking if an emergency arises.

But what about the things you’re planning to do? Maybe you’d like to get new kitchen appliances . . . or new flooring . . . or new furniture . . . or you need to paint a few rooms . . . the list can go on and on. If you’re eyeing that fridge you saw in the ad, then grab a calculator and do a little math. How much is it? How much is it on sale? How much do you need to set aside each month (or paycheck) so that you can buy it in 3 months? 6 months? Do you need new carpet in the family room? Measure the room. Find the square footage. Shop around and compare prices. How much would it cost to carpet the room? How much do you need to save each month to have it installed in 4 months? 8 months? A year? Do they offer some favorable financing? Or maybe a deal offering no interest, no down payment, etc.?

If you’re contemplating a home improvement project, do a little research and little investigating. Look into different types, models, prices, value, or selection. Be on the lookout for sales and discounts. Then, do the math. One of the principles of The Money Roadmap is to set aside a predetermined amount of money for each of your priorities on a regular basis so that it’s there when you need it. If you do your detective work, then you’ll have a much better idea of how to accomplish your goal. If it’s something that can be achieved with your refund alone, then give it some serious thought. If it’s a more expensive endeavor, then use some of your tax refund to get started, then add to it regularly until you’ve met your goal. Consider it a sort of ‘down payment’ on what you’re working toward.

Your home is your living space . . . work space . . . family place . . . hiding place . . . you name it. So put your money to good use and make it yours.

If you’re interested in learning more about how to have more control over your money, check out my book The Money Roadmap: You choose the destination AND the way! Good luck to you! You know where to find me if you have any questions!

Tuesday’s Tip: Invest in Your Kids

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In this week’s installment of ‘what to do with your tax refund’, I’d like to suggest that you invest in your children. Invest in their futures. “You mean, like, save for college?” Well, yes. And no. There’s more than one way to give your kids a helping hand. Even if you don’t have kids, but will, keep these thoughts in mind for future reference.

If you have visions of sending your kids off to college someday, you may want to consider a higher education savings program. And by ‘higher education’, I mean anything beyond high school. There are several options out there, and that can get pretty confusing, so it’s best to chat with a professional who can sort it all out for you and help you decide which way to go. Every investment firm has people to help you, or you can ask a friend or colleague to recommend one. I’ll be going into a little more depth about these options at a later date, but for all intents and purposes, today, I’m just trying to plant a few seeds for you. One word of advice though . . . start as soon as you can and then stick with it. Or start with your refund and do what you can when you can. Every little bit helps.

Another way to invest in your kids is to get them involved. Use the refund money to pay for music lessons or to learn a sport. Both activities teach kids how to be valuable members of a group, develop fine motor skills, and improve self-confidence. Sports help kids maintain healthy lifestyles and weight, and studies have shown that kids involved in music do better in school. So, not only will your kids be active and engaged, but the skills they’ll learn will teach them discipline, cooperation, and that hard work pays off. Who knows, their talents may even help them into college, if that’s their dream.

If your child is completely against music or sports, there are other options to pursue. There are classes they can enroll in through libraries, park districts, and even local community colleges. If your child has a talent for creating delicious meals, then try a junior chef class. If he or she has a knack for computers, there are many classes that focus on things from program or gaming design to architecture. And if your kid loves photography, try one of those. The possibilities are nearly endless. Talk with your children about what interests them and move forward from there. There are lots of inexpensive options if you spend a little time doing some research.

I could go on and on about the benefits of getting kids involved in all kinds of activities, but I’ll save that for another time, maybe. But for now, I’ll just make the humble suggestion of putting your tax refund to good use by using it to pave the way to self-discovery and to help build their futures . . . whatever they may be.

Tuesday’s Tip: Pay It Down

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So, you’ve got a little money coming back from the government? Good for you! I’m glad to hear it! The question now is what to do with it, right? Hmm . . .

Well, over the next few weeks, I’m going to be posting ideas about that very topic. But first, I need to ask: Did you do your ‘homework’ from last week? Did you make that list of priorities? Things you’d like to do in life? Goals you’d like to accomplish? It’s always a good first step when you’re talking about your money and what you want to do with it.

Today, let’s start with the first idea: Pay it down! Debt, that is.

Debt is simply any money that you owe. Debt can be anything from mortgages to loans of any kind to credit cards. If you’re getting a refund, and you don’t need it just to live right now, then consider using it to pay down any excess debt. I don’t know many people who are without a mortgage payment, and that’s a ‘long haul’ kind of thing, so it’s probably not the best option. But what about a second mortgage? How about a car loan that is close to maturing? Do you have any student loans you’d like to pay off? Have a few medical bills you’d like to get rid of? How about those credit cards? The reason I list these kinds of debts is because these are the most common. And, generally, short-term items take less time to pay off and it’s a lot easier to put a dent in them with extra funds that come your way.

A couple of things, though, if you’re thinking of throwing some money at a loan . . . 1) make sure there’s no penalty for paying it off early and 2) make sure you put the money toward the principal. Don’t just ‘make an extra payment’. You’ll be paying principal and interest. The best way to get rid of the loan and save some money on interest is by paying down the principal. Once you’ve done that, check your next statement and look for the extra principal payment and how it reduces what you owe as well as how it lowers the interest.

If you want to pay off credit card debt, you can do a couple of things. First, take a look at your balances. Is there one that can be paid off immediately with your refund? If so, you may choose to get rid of it completely so you don’t have to worry about that one anymore. If that’s not an option for you at the moment, there’s another way. You can use the money to reduce the balances, and then systematically pay them off one by one. There is a great method to doing this that I’ve detailed in The Money Roadmap: You choose the destination and the way! Check it out!

Before you make any decisions, do a little number crunching and see where your money would be of greatest use. You may not be able to completely eliminate a loan or balance, but reducing what you owe will only help you in the long run. The faster you pay off your debt the more you’ll have to live on or put toward new goals.

Tuesday’s Tip: Don’t Blow It!

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A short time ago, my husband and I filed our income taxes and were delighted to learn that we’d be getting a sizeable chunk of change from our dear Uncle Sam. Our pupils dilated, the fresh scent of crisp bills filled our noses, the joyous chorus of jingling coins resounded in our ears. Suddenly we found ourselves rubbing our hands together, giggling devilishly, and drooling. Visions of our ‘wish lists’ danced gaily in our heads.

Our excitement was short-lived, however, when the adrenaline wore off and we came crashing back to reality.

Of course we got a little carried away . . . but who doesn’t when the heat of unexpected cash begins to burn a hole in our pockets. Which leads me to the tip of the day: If you have a tax refund coming to you, don’t blow it!

Hear me out, now. What I mean by that is don’t blow your tax refund on frivolous crap. Harsh? Maybe. But true. Would my husband and I like to spend our refund on things we want? Like a Hawaiian vacation? Sure! A really cool digital SLR camera! Absolutely! Another computer? Uh huh. A huge HDTV? Yup. But we know we won’t. Why? Because those things are not on our list of priorities that we’ve set for ourselves and our family.

So, if you have a refund on the way, wait! Don’t do anything yet! Hang out with me for the next few weeks or so. I’m going to post ideas on ways to put your tax refund to work for you. I’ll give you ideas on ways to save it, ways to spend it, or a little of both. But do yourself a favor first: take pencil to paper and make a list of priorities in your life. Begin with the things you need. List things you’d like to accomplish. The things that are most important. Then stick around . . . hopefully you’ll get a few good ideas to start brainstorming and make good use of that refund!