2020 was an unusual year. It was also a difficult year. Some of us had to learn how to work from home, while others were unable to work at all. Many businesses across the nation had to close for months at a time. So, hopefully this opportunity to file your taxes and get your return is a much needed financial relief. We would also like to add that we are in no way, shape or form belittling you if you need to spend this tax return on essentials. As we said, it has been a rough past year. You're the ultimate deciding factor on how to spend that tax return. That being said, if you are in a good financial situation then maybe these next few tips might just help you get in an even better situation. Read on for some more tips on how to spend your tax return.
Knock Out Big Ticket Items
Did your car break down? Are you behind on your child's tuition bill? We always stress the importance of paying for something now rather than later. It's why pre-planning your burial is so important. It is much easier to do it in advance as opposed to having your family figure out your last wishes with little time to think it out. It's very stressful.
That being said, whatever big ticket items you need to buy or repair, prioritize them over something you just want to purchase. If it's incredibly important to your livelihood or the livelihood of your children, it's probably worthy of spending that tax return on it. Clothes are nice! New accessories are wonderful! But having a functioning vehicle to get to work every day is better.
In fact, before you even get your tax return, make a list of high priority items you need. Be honest with yourself and truly figure this out. That way when your money hits your account, you can go down the line and figure out what you can get done right away. It's a good way to get life back on track or just breathe a simple sigh of relief as something that was really stressful is now out of your life.
Pay Off Your Credit Card
It's by no means the most exciting purchase you can make, but having zero debt is a great feeling. Do you know what's not? Watching debt pile up. It can feel overwhelming. It can also destroy your credit score and make it extremely difficult to take out loans to start a business or buy a new home. Credit card debt can halt you from taking that next step in your life. That's why it's a great idea to pay it off when you get the chance.
Start A Portfolio
A great use of your tax return is to build wealth that lasts a lifetime. Depending on the size of your return, you're probably not going to make a million dollars right away. But that shouldn't discourage you from opening up a portfolio and investing. Investing is a great way to ensure that your overall wealth increases from year to year. Again, a couple of thousands of dollars will not make you a millionaire overnight. However, that's not to say $3,000 can't turn into $10,000 over five years or so. That's money that can then be used to upgrade your life! Instead of having your tax refund sitting in a savings account, making very little on interest, make 2021 the year you start investing!
Invest In Yourself
You're the most important asset in your own portfolio! You make all of the decisions which, in turn, makes all of the money. So why not invest in yourself? Have you been thinking about a new job or a new career altogether? Go for it. We don't think anyone would judge you for taking your tax returns and using them to sign up for new classes, enrolling in an online school, or purchasing a membership to a professional organization. In doing this, it's actually a smarter investment that can lead to bigger paychecks and great job stability.
As we mentioned previously, 2020 was not the greatest year we've had the pleasure of experiencing. It tested us physically, mentally, and financially. When it comes to our finances, tax returns are a great boost to our personal incomes. If you need to spend it on the essentials, by all means, please do. But we hope that you find some of the tips above useful and bring you a lot of prosperity in the coming years.
Here's to 2021 and beyond!