Everyone’s favorite thing about tax season is getting that tax refund check in the mail. It’s like Christmas in April! We know how tempting it is to run out and spend it all on a new toy or on that trendy restaurant you’ve been wanting to try, but remember, your tax refund is not a gift or a lucky lottery win. It’s money you worked hard to earn! Start funding your peace of mind by putting it toward your future. You’ll be glad you did.
Idea #1: Save for a Rainy Day.
You never know when you might lose a job, get sick, or run into an unforeseen expense, so an emergency fund is something everyone should have. Why not put your refund check toward starting one? Once you get into the habit of saving your money, you can splurge occasionally knowing you can afford it.
Idea #2: Cushion Your Golden Years.
Make your retirement as comfortable as possible by opening an Individual Retirement Account (IRA), and saving as much as you can. Every little bit helps.
There are two common types of IRAs: Traditional and Roth. A Traditional IRA might help you qualify for a deduction on your tax return, and you won’t have to pay taxes on your earnings until you withdraw them at retirement age. Some people choose a Traditional IRA if they think they’ll be in a lower tax bracket when they retire, so paying taxes on this money then will be cheaper than paying them now.
With a Roth IRA, your contributions are made with after-tax income, but your money will grow tax-free until you retire. At that point, your withdrawal will be tax-free, assuming you meet the conditions. Some people choose this type of IRA when they are starting their careers or when their annual income is under $132,000.
Idea #3: Eyes on the Prize.
Are you saving for a goal like a car, a wedding, or a house? Then you might want to put your refund check into an investment account instead of a retirement account. What’s the difference? With an investment account, your money can earn you interest and dividends overtime, and you’re able to take money out as needed, generally without penalties.
Finhabits makes it easy to open Traditional and Roth IRAs as well as individual investment accounts in just 10 minutes. Our mission is to help everyone get into the smart habit of investing for the future, so you can forget about complex paperwork and expensive fees. And don’t worry if you don’t have much experience investing, our mobile service is designed with everyone in mind!
To get started, visit Finhabits.com today.
Finhabits does not provide tax advice. Please contact your tax professional for any questions questions regarding your taxes.