Those W-2s are rolling in! Which of course means refunds are coming soon. It’s your money and I KNOW YOU ARE GLAD ABOUT IT! If you’re like me you start spending money in your mind before you even get it. So here are a few ways to spend your refund money that will set you and your family up for financial success.
1)Life Insurance- Of course I’ve talked a lot about getting life insurance. Mainly because I started my professional career as a licensed broker,and still have my license in several states. I have seen families in really tough situations with the unexpected loss of a loved one. Watch more HERE on what type of life insurance you need. If you don’t have a policy I’m recommending you use your refund to pay off the entire year of premiums. Lets say it’s $200-350 annually, paying in advance gives you breathing room to not having to come up with extra money that you haven’t previously budgeted. Paying in advance can be your annual tradition, OR just a way to get adjusted to the added expense.
2)College Savings (529 Account)- Got kids? I’ve got 3. So year I’ve decided to look into a 529.
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. (SEC.GOV)
Most 529 plans can be tapped for out of state colleges when the time comes, so don’t be afraid to start one because of the possiblity your child may opt for an out-of-state college.
3)Pay Off High Interest Credit Cart Debt- Pay any high interest debt for that matter. Evaluate what you owe, and rank in order of interest rate and amount due. If you have similar amounts, but one with a significantly high interest rate, pay off or pay down the higher rate debt. This debt is more expensive, and if the you stop the bleeding by paying down this principle, it will save you in the long run.
4) Open a Secured Card- Secured cards are a great way to establish and build credit. The limit for the credit card will be whatever amount of money you put in. My secured credit card is backed by a CD that pays a very small amount of money for keeping my money in it. Find a no fee secured card through a credit union, and keep your balance/usage at or below 30%. This will improve your FICO score and creates an emergency savings with the advantage of a credit line.
5) Start a Business- It takes money to make money. Period. Maybe not a lot, but there is ALWAYS an upfront investment involved in starting a business. Even if it’s a “side hustle” , stop putting off your dreams because of the costs. Take this opportunity to invest in yourself, it could have a big return on investment. File your D/B/A or LLC., open a business bank account, and invest in logo, branding, and marketing materials.
6)Open a Mutual Fund Account- When I posted the tips on the Facebook page someone asked, “How do you know which Mutual Fund to go with?”
There are sooooo many options with a mutual fund. But we’re talking about how to use our tax refund, which is a limited amount of capital. So let me tell you about my Mutual Fund of choice. I’ll start by introducing you to Mellody Hobson. Auntie Mellody(that’s what we call her around here) is the president of Ariel Investments. She started at Ariel Investments as an intern, and became the president in 2000. Ariel Investments manages 10 BILLION dollars in assets, and is one of the largest African-American owned money management and mutual fund companies in the United States. That’s where John Rodgers, Jr. comes into play. He’s the sharp guy next to Auntie Mellody, and the very wise man that made her President. Rodgers is the Chairman and CEO of Ariel Investments and co-manager of Ariel Appreciation, Ariel Investments’ Mutual Fund.
Okay now that introductions are out of the way, here’s why I like Ariel. You can open a mutual fund account with only $1000. Many firms do not allow investments at that low of a dollar amount. The fund is managed well, has a good performance history, and has superb leadership. Plus they just epitomize Black Excellence. That’s always a bonus.
7)Home Repair, Maintainence, or Upgrade – The biggest surprise for first time homebuyers is the cost of maintainence for their property. Even NEW HOMES require major upkeep. One way to spend your refund is protecting your biggest. Replace those loose shingles, paint or replace exterior trim, or upgrade your vinyl floors or countertops. Do something that will prevent further damage, or complete an upgrade that will add value to your home.
8)Pre-Pay Your Mortgage – Yes you probably already budget enough to cover your mortgage, so why pre-pay? Prepaying saves you MAJOR MONEY on interest. If you are able to pay your mortgage off 5-10 years ealier than the planned 30 years, you can save your family tens of thousands in interest.
9)Dream Home Down Payment Savings Account- If you have plans for home ownership, you’re probably working on your debt and managing your credit. But even a 700 FICO score alone won’t get you into your dream house. You must have a downpayment. Let your refund be the start of your Dream Home Fund. Boost Up is a service that MATCHES a portion of your down-payment savings account if you use one of their partner vendors or affiliates. THAT IS FREE MONEY. Click here form more information.
10) Charitable Contribution- When you’re on a tight budget it can be hard to give to the organization of your choice on a scheduled monthly basis. Use your refund to make your annual contribution. It will of course have it’s tax advantages for next year, but you’ll also feel great giving to a cause greater than yourself.
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Comment below if you have any tips for making your refund check work for you!