According to Kiplinger, the average tax refund has been around $3,000 for the past two years. A 2012 TurboTax survey revealed that 42% of people said they plan to use the money to pay down debt and cover bills, 25% plan to save and 15% plan to splurge. What will you do? Here are a few investment options that may help put you in a better financial position:
STAY AHEAD OF THE GAME
Pay Down Debt
Put money toward your credit card(s) with the highest interest balances. You’ll end up paying less interest, and lowering your credit-utilization ratio may improve your credit score. We like the way Money Talks News put it: “Paying down an 18% interest credit card is like earning 18%, risk-free and tax-free. There aren’t many investments offering returns like that.”
Build a financial cushion, ideally enough to cover at least three months of living expenses. Keep the money easily accessible in an interest-bearing account. This helps to ensure your bills get paid on time and gives you peace of mind. America Saves has some great emergency fund tips.
Contribute to your child’s educational savings. NVE offers the Coverdell Education Savings Account (ESA), a deposit account established for the qualified education expenses of a designated beneficiary.
You can contribute up to $5,500 (or $6,500 if 50+) to an Individual Retirement Account (IRA). If your modified adjusted gross income is $127,000 if you filed as single, or $188,000 or less if you are married filing jointly, you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement. This chart may help you determine which account fits your lifestyle. NVE offers both types of accounts.
Planning a vacation? Set aside some or all of your refund rather than use a credit card that carries interest. Open a separate account to keep you on track and add money whenever possible. NVE’s Universal Club savings plan offers a disciplined savings program where, after a 12-month period, your total savings is credited back to your checking account, with interest, to be used for whatever you desire.
According to Forbes, your home is likely one of your biggest assets, so it makes good financial sense to take care of it. We agree! Home renovations can lift your property value, prevent future damage, and make your living space more enjoyable. Here are some you may want to consider:
• New entry door– A new front door can enhance curb appeal, improve security and lower utility costs. According to Remodeling magazine’s Remodeling 2012-13 Cost vs. Value Report, a $1,137 steel entry door replacement project returns 85.6% of your investment.
• Weatherize– For a couple hundred dollars, a do-it-yourselfer can install insulation, caulk, and door seals, reducing household energy consumption by almost 35% in the typical weatherized home. For a bit more money, installing energy-efficient windows can reduce household energy bills by 7% to 15%, plus it’s eco-friendly!
• Paint– Updating a space with a fresh coat of paint can go a long way when it comes to selling, or just personalizing your home. A gallon of paint can be bought for less than $30 and should provide one-coat coverage for about 350 square feet. If you are putting your house on the market, neutral colors are a safe bet.
To learn more about smart ways to invest your tax return, visit the NVE website, stop in to your convenient neighborhood branch, or call 1-866-NVE BANK.