Let’s leave bad financial habits in the year 2016, and let’s prepare our minds and bank accounts for a better 2017
Have you ever gotten a tax refund or lump sum of money, and months later felt like you had nothing to show for it? If this has happened to you, it’s OK to make mistakes. However, it is not OK to repeat them. Let’s leave those old financial habits in the year 2016, and let’s prepare our minds and bank accounts for 2017.
You are a wealth builder, and as a disciplined wealth builder, you must have a plan in place for your tax refund. It’s about time we give your money a purpose. Here are some ways to use your upcoming tax refund wisely:
Start or increase your “in-case-life-happens” fund
There are always going to be unexpected expenses that require you to use money. Face it, life happens! Unexpected expenses will always come, but it is only considered an “emergency” if you’re unprepared.
Start 2017 with an account that is ready for any unexpected expense that comes your way. Saving something small every month is great, but why not jump-start the year with a solid foundation. The goal is always to have 3-6 months of your monthly expenses set aside. So, be sure to determine that amount, and deposit a portion of your tax refund into your savings account.
Pay down your high-interest credit cards
If you are like most people, the thought of owing someone is, oftentimes, annoying. You’d rather just get it over with, pay them off, and go about life without the thought of having to pay yet another bill. There’s nothing wrong with feeling that way, but before you go into the year 2017 ready to pay off ALL your debt; slow down. Review your outstanding debt, and only pay your high-interest credit balances down to a 30% utilization. By just paying your high-interest credit cards down, you will increase your credit score, and you can potentially lower your monthly credit card payment. Do not spend your entire tax refund on paying down debt.
Once you’ve paid the credit cards down: CUT UP THE CREDIT CARDS. There is no point in paying down your credit cards just to use them again. Grab some scissors, and end that bad habit immediately.
Invest in a Roth IRA
Paying down debt is important, but how long are you going to defer your wealth just to pay down debt? While you are building a plan to pay everyone back, make sure you take care of YOU!! Depending on your income, age, and financial goals, use your tax refund to open a Roth IRA. Roth IRAs are a great way to help lower your taxes and increase your retirement savings. Roth IRAs also allow you to take advantage of the tax-deferred compounded growth. Just think: when you retire, you don’t want to live off less income, right? If you’d like to be better financially in the future, it is time to start planning for tomorrow, TODAY!
Invest in a permanent life insurance policy
Life insurance is one of the best ways to create generational wealth for those who are most important to you. Having a life insurance policy in place should be a standard for people of ALL ages because it helps ensure that, as a community, we are leaving our families in better financial positions. However, life insurance can also be used as a way for you to invest your money and use it while you are living. By utilizing permanent life insurance to help grow your money, depending on the company and product, you can also receive downside protection (if you are not comfortable with watching your money go up and down with the stock market).
Every year during tax season, you can do an annual contribution into your policy. This way, you do not have to worry about monthly payments. Not only will you have one less monthly bill, but also another investment that can help create AND pass down wealth. Key items such as your age, health, and income will help determine how your local agent should structure your policy. Companies such as Nationwide, Pacific Life, and Transamerica Premier have great permanent life insurance policies that many people can take advantage of.