Thursday, March 2: Saving at Tax Time
- Saving a portion of your tax refund can be a big step toward meeting your savings goals. This tax season, get ahead of your financial goals by splitting a portion your tax refund into savings.
“Of life’s two certainties, the only one for which you can get an automatic extension.” Anonymous
The quote is funny, but it is so true. Nothing is certain but death and taxes. Lately, I’ve been scrolling my newsfeed on Facebook, and I see such a hot trending topic. People are talking about balling out with their taxes. Now certainly, that is your prerogative, do with it as you choose. If you have a refund check coming your way, consider using it to bolster your personal balance sheet. Many people view tax refunds as unplanned bonuses. They see the money as a gift from the government, to use for splurges or treats. A tax refund provides the opportunity to improve your financial situation. The average refund has been around $3,000 for the past two years. That’s a nice chunk of change. Here are five good things you could do with the money.
Build or rebuild your financial capability fund
Many people have raided their financial capability fund over the past several years and have had little extra money to restore it. You could use your refund to start rebuilding that fund, which can help you avoid landing in credit-card debt if you have an emergency. Keep the money easily accessible in a money-market account or savings account that earns interest.
Boost Retirement Savings
You can contribute an IRA — and withdraw the money tax-free in retirement. Isn’t that ironic? Taking your tax refund from Uncle Sam and placing it in an IRA then take it out in retirement and not have to pay taxes on it.
Build Your College Savings
It’s always hard to juggle saving for college and retirement. Here’s an opportunity to use your extra money to contribute to a college fund. You’ll be able to use the money tax-free for college bills, and you could get a state income-tax deduction for your contribution.
Help Your Child/ren Save
You can use the extra money to contribute to a Roth IRA for your child. Your child is eligible as long as he or she has earned income — from mowing yards or babysitting, for example. This is my favorite tip.
Purchase Tax Time Savings Bonds
Tax Time is a great time to kickstart or grow your savings for the future! U.S. Savings Bonds are one safe and easy way to do it. What are tax time bonds? Tax Time Savings Bonds are Series I U.S. Savings Bonds. Issued and guaranteed by the U.S. Treasury Department, Tax Time Savings Bonds can be purchased directly on your tax form. You can cash in your bond after one year at most banks or credit unions, but the longer your keep it the more it will grow in value. Your bond will earn interest for up to 30 years. If you cash your bond within 5 years, you’ll lose the last three months of interest.
Growth on your bonds is guaranteed! Bonds make saving safe, simple and secure.
What other way’s can you think of to save at tax time? Comment below and let me know.