Episode 102 

Top 6 Money Moves for Your Tax Refund! 

Tax season is upon us, and most people are ready to receive their refunds. What are you considering doing with your money? Here are six money moves I recommend to help you be purposeful and act with intent.  

Emergency Funding 

Having money set aside for a rainy day is very important. Unfortunately, most people don’t realize this until it’s too late. Recently with the pandemic many found themselves making less income than usual and having no additional funds to make up for it. This can create lots of problems, especially if you live paycheck to paycheck. Regardless of your situation an unexpected shift in income or additional costs have the potential to derail your finances. If you already have rainy day funds, consider using your refund to add to other savings buckets. Perhaps you know you’ll be spending money on something important soon, in which case, saving for that now is also a great idea!  

Eliminating High Interest Debt 

Now is the perfect time to accelerate your debt payoff strategy. Take your refund and use it to pay off any debt accumulating double digit interest. For example, credit cards or personal loans. Did you know that the deferment for federal student loans is still in effect? This means the interest rate on your student loans right now is at 0% until May. Consider shaving down your loans as much as you can now to avoid paying interest on a high principal amount.  

Life Insurance  

Most people prefer to avoid this, but think about what would happen if, unfortunately, you were to pass. Do you have children that depend on you for income? Do you have a loved one you help support? It’s likely they’d be in some financial trouble if your income suddenly disappeared. If you don’t have life insurance, try getting a quote. If possible, it’s worth it to at least consider the most basic type of insurance called term life insurance. For those of you who have life insurance through an employer take a closer look at the coverage amount so you can evaluate whether it’s enough for your specific situation.  

Kickstarting Holiday Funds 

About 40% of U.S. adults who celebrate during the holidays say they’d be willing to go into debt, or deeper into debt, for holiday shopping. If you’re one of these individuals why not plan ahead? Tap into your savings buckets and set some money aside for the holidays happening later in the year! This is an easy hack to avoid accumulating debt.  

Charity  

A lot of us are fortunate enough to want to give back to a cause that’s near and dear to our hearts. Giving back doesn’t always fit into our monthly budgets, but perhaps you can take advantage of this money and use it as an opportunity to help someone out. It’ll help you feel great too!  

Investing  

Money in the bank doesn’t grow as much as we’d like. The average interest rate for checking accounts in the U.S. is .03%. Overtime if your money is sitting in a bank, it’ll lose its purchasing power. Instead, consider an investment vehicle like a Roth IRA to benefit from tax free dollars by the time you retire. You can also try to open a brokerage account, which can easily be done online. Cryptocurrencies are gaining popularity because of their potential for high returns. But don’t get too excited. Make sure you understand your risk tolerance before choosing what to invest in. Also, don’t overlook the importance of investing in yourself. Buy a self-improvement book, attend a growth seminar, enroll in a gym, or even start your side hustle. These types of personal investments have the power to give you the highest rate of return.  

Notes:  

In this episode, Luis talks about the following and more:  

  • A unique opportunity that expires at the end of tax season  
  • How you can use your tax refund to create a ripple effect in your finances  
  • The many ways you can invest in yourself  

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