8 Smart Things to do with your Tax Refund to Increase your Net Worth

8 Smart Things to do with your Tax Refund

Are you planning to get a tax refund this year? If so, it is important that you use it wisely. Tax season usually means frivolous spending for most people, but not for us money conscious people of the world who want to get the most bang for our buck. Let’s talk about the money moves we can make with our tax refund that will increase our net worth now and for the future.

What is Net Worth?

Net worth is the sum of all of your assets subtracted by your liabilities or debts. Assets would include, but not limited to home value, cash, stocks and bonds, valuables, and other property. Liabilities include but are not limited to student loans, car loans, mortgage and credit card balances.

One: Emergency Fund

You never know when an emergency can happen, so it is important to be prepared as best you can. Did you know that 60% of Americans cannot cover a $400 emergency? What will you do if you unexpectedly lost your job? I was unexpectedly laid off from my job of 8 years. Thank goodness we had an emergency fund to cover our expenses until I found another job.

I recommend 3 to 6 months of expenses to be put away for emergencies. If you are just starting your emergency fund and you still have debt to pay, I recommend saving at least $1000 per adult and $500 per child. So a family of 4, 2 adults and 2 kids, will need to have at least $3000 of an emergency fund before focusing on paying off debt.

For more about planning for emergencies, read How to Make an Emergency Financial Plan

Two: Pay Off Debts

Paying off debts with your tax refund will definitely increase your net worth. Your debt is a liability. I recommend paying off your smallest debt first. If you have debts that are approximately the same amount, then pay off the debt with the higher interest rate.

Example:

$5,000 credit card @ 19.99% interest

$5,000 car loan @ 5.48% interest

Pay the credit card off before paying the car loan

For more about debt repayment, read The Ultimate Guide to Making a Debt Repayment Plan

Three: Invest in Your Retirement Savings

Increase your net worth by using your tax refund for your retirement savings. If you do not already have a retirement investment account, get one. Investing in a Roth IRA or Traditional IRA is the easiest way to start a retirement account even if you already contribute to your company’s 401 (k).

For more about IRA accounts, read Roth vs Traditional IRA: Retirement Basics

Four: Invest in Yourself

Using your tax refund to invest in yourself is a great way to increase your net worth. Going back to college or attending a career focus seminar can increase your chances for a promotion. More money means increased net worth.

Five: Make Home Improvements

Does your kitchen need an upgrade? What about your roof or AC unit? Making home improvements can increase your home’s value which will increase your net worth. If you think you home is fine just the way it is, what about the energy efficiency? Use your tax refund to buy energy efficient windows and doors. This will lower your current utility bills while adding value to your home.

Six: Refinance Your Mortgage

Take a look at your current interest rate and research what interest rate banks are offering. You will need your tax refund for closing costs. Yes, closing costs. You are essentially rebuying your own home. Refinancing your home will lower your monthly payment, leaving you with more cash each month to save or invest. Be sure to refinance your home with a reputable bank or credit union, there are a lot of refinancing scams out there.

Seven: Invest in Your Business

If there is any equipment or software that will help you run your business more efficiently, now is the time to use your tax refund and make the purchase. Efficiency saves time, more time means you can take on more clients or projects and make more money.

Eight: Spend it on Something You Want or Need

How can spending your tax refund on something you want or need help your net worth? Money is a top stressor for most Americans. Let’s face it; having more money can make us less stressed. Stress causes health problems and health problems come with high doctor bills. Relax, take that vacation, replace your work shoes, do something that will make you smile.

Proverbs 21:5 – The plans of the diligent lead to profit as surely as haste leads to poverty.

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Category: Taxes


How to Get Out of Debt While Living Paycheck to Paycheck

Get Out of Debt While Living Paycheck to Paycheck

Consumer is debt is climbing every year. 8 out of 10 Americans have debt. The average household has over $16,000 worth of credit card debt and almost $50,000 of student loan debt. With all of this debt, how do you get out of debt? What if you don’t have any extra money each month to help you get out of debt?

If you don’t know my debt story, check it out here. I had debt and lots of it. Student Loans, car loan, and credit card debt were my poisons. Living like a broke college student helped me get out of debt faster. Here are is how to get out of debt while you are living paycheck to paycheck.

Know Your “Why”

First, you need to understand why you are getting out of debt. Let’s face it, if you have no debt you will have more money each month to spend any way you want. My get out of debt journey started because I wanted more money to spend. Today, I want to stay out of debt because I like the freedom. The less money I need to live, the happier I am.

With my freedom, I was able to take extended maternity leave when my second child was born and I now work part-time to have more time for my family. We are still able to enjoy annual vacations, dining out, and other entertainment luxuries even though we have less income.

My why is my family, what is your why?

Make a Budget

If you want to get out of debt, you need to tell your money where to go. If you don’t make a budget, how will you know if you can pay off your debts?

Need help making a budget, read 4 Steps to Making a Budget That Works.

Making a budget was difficult for me. Between bills and debt payments, I was living paycheck to paycheck. I felt like I had no extra money to pay down my debts and I will be in debt forever. So I made it a mission to find extra money and create a debt repayment plan.

Create a Debt Repayment Plan

To get out of debt, you must make a plan. Believe it or not, there is a right way and a wrong way to pay off debt. Focus on paying off your smallest debt first and snowballing the money into the next highest debt. Continue to pay the minimum balances on other debts.

To read more about making a Debt Repayment Plan, read The Ultimate Guide to Creating a Debt Repayment Plan .

Track Expenses

I started tracking my expenses to get out of debt. Track your expenses any way you can: write it down, use an excel spreadsheet, or apps like Mint.com. Find out where your money is going to see what expenses you can cut.

I was surprised at how much money I spent each month on dining out for lunch, magazine subscriptions that I would never read, and credit card interest. Which leaves me to my next tip…

Cut Expenses

This may seem like an obvious way to get out of debt. There are ways to cut your expenses without sacrificing a lot. For example, just switching car insurance carriers can reduce your car insurance bill and negotiating a smaller interest rate on your credit cards can free up some cash each month.

For more money saving tips, read Foolproof Budgeting Tips for Saving Money Now.

Sell Stuff

The fastest way to get out of debt is to sell items that you are no longer using. This includes clothes, books, technology, and whatever else you can think of. This will help with putting big lump sum payments on your debt.

I sold my old textbooks on Amazon.com, participated in community garage sales, and sold clothes to consignment shops. You will be surprised at how a few extra dollars can go a long way to paying off debt.

Side Hustle

If everything else fails, you can always pick up a side hustle to help get out of debt. There are lots of flexible jobs that you can create your own schedule. Uber (affiliate link) lets you drive or deliver on your own schedule.

For more side hustle ideas, read Side Hustles I Have Tried that Actually Make Money.

How is your “get out of debt” journey going?

Romans 13:8 – Owe no one anything, except to love each other, for the one who loves another has fulfilled the law.


50 Money-Free Things to do During a No-Spend Challenge

50Money-Free Things to doDuring aNo-Spend Challenge

Every February, my family does a no-spend challenge for the entire month. I like to call it a “the financial reset button.” Many of us are still recovering from all of the holiday spending in February, so it makes sense to try a no spend challenge. Also, I am participating is a savings challenge this year, so the extra money not spent this month will go towards my savings goal. I have compiled a fun list of money free activities to participate in with family.

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Side Hustles I Have Tried that Actually Make Money

Side Hustles I Have Tried That Actually Make Money

It seems today that everyone needs a side hustle. Whether you are trying to get out of debt or save for a family vacation, making a little extra money is nice. There are lots of side hustles that you can do around your own schedule that does not involved working at the mall. Here are some side hustles I have tried that have made me some money in addition to my full time income. By the way, this post contains affiliate links.

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Category: Budgeting


How to Raise Your Credit Score like a Boss

How to Raise Your Credit Score Like a Boss

Credit scores are a necessary evil. If you need a loan for school or any big purchase, you need to have a good credit score. If you are looking to raise your credit score, I have come up with 5 steps that will help you do so. It is no secret that I do not like the credit scoring system. Credit scores are designed to keep people in debt. It is important to raise your credit score wisely and not go into more debt doing so.

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