Are you anticipating a tax return this year? If you’re like most people, you may be thinking about that next big purchase you want – a new TV, the latest smartphone, or even a vacation!
While there’s nothing wrong with treating ourselves once and a while, those treats won’t do anything for us in the long run. What about looking for ways to invest your refund to grow your wealth, save for retirement, and set yourself up for a lucrative financial future?
With so many options available, it can be tough to decide how to best use your money. In this blog post, we’ll discuss some of the smartest ways to invest your tax return and grow your wealth (and invest in yourself!).
So read on for some helpful tips!
Start by making a plan
The most important thing you can do when you’re expecting any lump sum of money is to plan for it.
Sit down and make a list of all your expenses, like rent or mortgage payments, groceries, utilities, gas, etc. Then estimate how much money you’ll need to get through the next 6 months. You should also think about any debts you’d like to get rid of – for example, if you owe $5000 on a credit card with 21% interest, you might consider investing your tax return in paying it off.
Remember, rather than letting your emotions take over, one of the best ways to get money working for you is to make a plan and spend it wisely!
How can you make money work for you?
It’s common to look at the money and your bank account and think, “… if I have x amount of dollars, I can buy something that costs x amount.”.
So many people work tirelessly to make enough money to fund their lifestyle while forgetting that money can also grow their wealth!
If you know how to spend it, money is an incredible tool for investing and growing your wealth. And investing a tax return is actually one of the smartest things you can do! Best of all, investing doesn’t always mean investing in stocks or mutual funds – that’s just one option. You may want to consider investing in fractional real estate ownership or even something that will give you immediate returns.
For example, if you’re trying to save up for a new car, investing your tax refund could help you get there much faster. This is why investing your tax return in particular accounts like a TFSA is such a smart idea. If you put $5000 of your refund into a TFSA and invest it wisely (we’ll discuss investing strategies later), you could make up to $50,000.
Let’s discuss the top 10 ways to invest your tax return.
1. Start an emergency fund
An emergency fund is a stash of cash that you hold in reserve for unexpected expenses. But the sad truth is, many people never build one. And when an unplanned bill comes up, they have to borrow money or sell something to come up with the cash they need. By investing your tax return and building an emergency fund, you can make sure you have money set aside for life’s unexpected moments.
Start investing your tax return by opening a high-yield savings account to earn interest on your funds. Remember, the earlier you start saving, the more time your money will have to grow. If you’re not sure how much to save, try to save at least 3 months’ worth of expenses.
2. Boost your retirement savings
Most people spend their entire working lives investing funds in order to prepare for retirement. But if you start investing your tax return and boost your contributions, you can set yourself up for a comfortable retirement much earlier than that.
Even just investing $500 from your tax refund in a Roth IRA or TFSA can make a big difference. But investing $1000 or more can really add up over time!
3. Fund your child’s education
If you have kids, investing your tax return in their future is another smart way to use the money.
Thanks to Section 529 plans, investing for your child’s higher education has never been easier or more tax-efficient . These college and university savings accounts are sponsored by individual states, and they help you invest funds for your child’s tuition tax-free.
In Canada, take advantage of your RESP and the Canada Education Savings Grant which provides “20% on the first $2,500 in annual personal contributions to an RESP, for a maximum of $500 per year.”. This is free money that anyone can take advantage of!
4. Start investing in yourself
One of the best ways to invest your tax return is in yourself! For example, investing in education or training that will allow you to gain job skills can improve your career and earning potential.
You might invest in a course on how to improve your resume, an MBA degree, or investing in a professional certification program.
5. Pay into your Tax-Free Savings Account (TFSA)
If you have a Tax-Free Savings Account (TFSA) , investing your tax return is another smart investing move.
TFSAs are flexible accounts that let you hold many different kinds of investments, including cash, GICs , ETFs and mutual funds . And because the money inside them grows completely tax-free, investing your refund into your TFSA is a smart way to boost your wealth.
6. Invest in dividend stocks
Dividend investing is another great investing strategy. After you’ve covered some of the basics with your emergency fund, Roth IRA and Tax-Free Savings Account, investing in high-quality dividend stocks is a sensible next step. These are stocks that typically pay dividends every quarter, and investing your tax return in them is one of the best ways to supercharge your portfolio.
You can even set up an automatic investing plan, so investing your tax return becomes an effortless part of your investing regimen.
7. Pay off high-interest debt
Do you have credit card debt? Student loans? A car loan that’s costing you too much money? By investing tax return funds in paying off debts, you’ll save a lot of money on interest and get out of the red faster.
If you have a high-interest credit card, investing your tax return could help you pay it off faster saving thousands in interest! Once the debt is gone, investing your tax return can help you grow wealth much more quickly than paying off an interest rate of 18 percent would.
8. Invest in fractional real estate
Real estate investing has grown increasingly popular over the years, and investing your tax return is one way to get started investing in property. It allows you to buy an investment property with minimal money down, and investing can provide monthly cash flow while you wait for it to appreciate. Also, if you’re investing in a property with others, investing your tax return can be an easy way to divide up the down payment and other expenses.
If you want to invest your tax return in real estate investing but don’t have the cash or credit for a full investment, you can try fractional investing. This way, you can still own a share of a rental property, which will appreciate over time and provide monthly cash flow. Even investing a couple thousand dollars can be enough to get you started.
At BuyProperly, we use proprietary AI technology to help our investors see projected annual returns of up to 10-40%! Learn how you can get started for as little as $2500.
9. Invest your tax return in peer-to-peer investing
There are many different ways to invest tax return funds, but investing in peer-to-peer lending is one of the most popular right now. This investing strategy allows you to earn high returns (often over 10% ) investing in personal loans like credit cards, home improvement projects, small business financing, and more.
10. Start a business
Finally, investing your tax return could help you start investing for yourself and invest in your own future. As more people realize that they don’t have to work for someone else anymore, investing your tax return is one way to start investing in your future. You can even use this investment as a tax write-off!
So, there you have it! These are 10 of the best ways to spend your tax return money in order to grow your wealth. We hope this information was helpful and that you are feeling excited and motivated to get started on growing your money.
If you have more questions about how to get started in real estate investing for only $2500, learn more about our fractional ownership model! Visit www.buyproperly.ca