9 Year Mortgage Suggests How To Spend Your 2011 Tax Refund

Now that you have filed your taxes, or are about to before Tax Day April 18th, it’s a waiting game for your refund. 9 Year Mortgage is interested in what its readers will be doing with their refund this year. Haven’t put much thought into it? Well, then let 9 Year Mortgage give you some pointers on some smart things to do with your tax money in 2011.

Don’ t be fooled into thinking that your tax refund money is extra money–it is money that was previously taken out of your paychecks! It would be wise for you to keep this in mind when you get your lump sum from the fed’s added to your bank account. This time last year, the average return that individuals got was $2,683 and this year’s refundee’s are becoming pleasantly surprised with the increase in their refunds to an average of $3,036. So what should you do with your $3,000+ refund? 9 Year Mortgage has some ideas that will ultimately help you and your family’s financial future.

How To Spend Your Tax Refund

• Pay off High Interest Items First – Your highest interest item is most likely your credit card. Whether your tax refund allows you to pay some or all of your credit card off, it is beneficial to put even just a little extra money towards your bill. No credit cards? Putting money towards an auto loan or your student loans would be an equally intelligent thing to do.
• Invest It – There are multiple places to invest a large sum of money, which is why 9 Year Mortgage is going to break down investing into a few sub categories

1. Home – Invest parts of your money into home remodeling or appliances. It is always a good idea to increase the value of your home or to cut your monthly bills, so 9 Year Mortgage suggests using your refund to buy a storm door or a high efficiency dishwasher. Both of these investments will not only save you money on your monthly utility bills, but items like a steel storm door will add approximately $1,250 to the value of your home.
2. Savings – Here is something for you to consider… If you invest your $3,000 refund into your savings account every year and get 10% annually on it, in 20 years you will end up with $189,000.
3. IRA – This will allow you to invest your refund money into a tax-advantage program that will allow your earnings to grow tax-deferred.

• Generate a Tax Credit for Next Year – Get  your shopping fix in by buying something that will improve  your home and develop a tax-credit for next year. What does this you ask? A solar water heater. Yes, they do cost $3,000 – $5,000 BUT it will save you 20% in your monthly electric bill and it will give you a tax-credit for next year of 30% of the cost. So if you spend $4,000 on a solar water heater this year, the tax bill for next year will be $1,200 lower.
• Improve Yourself – 9 Year Mortgage highly suggests advancing your personal skills or tools for improvement. Take that class you’ve been eyeballing that will help you get your promotion, buy the computer software that will help you earn money, or enroll in a course at your local university to learn a new skill. Investing in yourself and improving your skills or knowledge will greatly benefit you at home and in the work place.
• A New Set of Wheels and a Place to Sleep – No, we are not insinuating that your go purchase a new or used hybrid car, that would be ridiculous – we want to pay off debt, not create it! However, if you travel mostly local roads, a scooter can get anywhere from 95 to 105 miles per gallon. A brand new scooter can cost as low as $2,500 but the downfall is some only get up to speeds of 35 mph while a little more expensive brand can reach 50 mph. So if you can manage driving to and from work at those speeds, you’ll be saving yourself a whole lot of money in gas. Another route to take with your tax refund is purchasing a new bed. In one year, you will use your bed for nearly 3,000 hours so why not invest in an upgrade? This year you can maximize your sleep time and minimize tossing and turning, which is always accompanied with back pain.
  
• Create a Memory – You may want a big chocolate bar, but this year 9 Year Mortgage is only allowing you a financial Hershey’s Kiss. Use only 10% of your tax refund to spoil yourself and/or your family. However, if you refuse to spend any of your refund money on the previous suggestions, make your spending worth it by creating a memory with your family. Depositing $3,000 into an account and spending a couple dollars here and few dollars there will not accomplish anything out of the ordinary. If you must spend it all in one go, at least spend it on something you and your loved ones will always remember, like a trip to Disneyland or White Water Rafting.
  

9 Year Mortgage Addresses Some Critical Issues

Remember that a tax refund is really money that has been withheld from you throughout the year. If that money was included in your paychecks, what would you have used it for? To pay a little extra on a credit card or go on a massive shopping spree spending $3,000? The latter doesn’t make sense when you look at your refund broken up into paychecks, so why should it make sense now to use your “extra” money so frivolously? 9 Year Mortgage is aware that only 10% of Americans who receive a tax refund blow it completely on luxuries; But the other 90% of tax refund receivers do not use the money to the best of their ability. They decide to spend it a little at a time, neglecting bills with high interest rates or loan it to a family friend hoping to see it again. Others use it as a down payment for a new car or another loan, only generating more debt. Sadly there are those who use their tax refund to temporarily sustain their unattainable lifestyle, using it in anticipation of getting a loan or spending it on the newest and hottest items like an iPad, without the funds to permanently back it up.

9 Year Mortgage’s Summary on Tax Refunds

This year don’t get caught up in these unintelligent financial moves. Pay off those credit cards, increase the value of your home, and invest your 2011 tax refund. You can never handle your tax refund wrong if you plan ahead to spend it wisely. Remember, this money was already yours. If having a check with a large sum on it makes it hard for you to resist hitting up the mall or Best Buy, then divide it into 12 equal parts. That will allow you to see how much extra you would have made each month. Once your refund money is in smaller quantities, you may be able to see clearly what you normally would have done with approximately $250 extra each month. 9 Year Mortgage strongly urges that as your taxes are being processed, think of what you could do with your refund to benefit your financial situation.

Are you interested in learning more about securing your financial future? Then read another 9 Year Mortgage article entitled Frugality 101 to get started.

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