It’s that time of year again, and the news everywhere is talking about fun and exciting ways to spend your tax refund for 2015. But what about those of us that want to invest that refund money into something better than a new iPad or a trip to the beach?
Plus, with the stock market at all time highs, and bond interest rates at all time lows, simply buying some stocks or bonds and hoping for the best isn’t an ideal plan.
So I came up with 4 ways to smartly invest your 2015 tax refund, that I would actually do myself (if I actually got a refund…more on that below)
1. Pay Down Debt
This one is pretty obvious, and talked about a lot on other sites (I promise the other listed below are much more interesting), but this one is a vitally important one!
If you are paying high amounts of interest on debt, like credit card debt, you are seriously stunting your financial growth. Paying the minimum balance on your cards means that in the long run, you are paying much more for things than you actually intended to pay.
Each month, money that would normally go to investing smartly, is instead going to keep your head above water and the debt collectors at bay. If you have high interest debt, step 1 is to get out of it.
Once you have solid financial in this arena, you can begin to build something better for yourself. Rather than building your future from inside a hole, you are building on solid ground.
2. Take A Class Related To Your Career
If you want to make more money, you need to make yourself more useful. To give yourself this leverage, you need to have the skills necessary to perform significantly better than your coworkers.
Your company may or may not provide additional education, classes, or options to attend seminars in your field. If they do, take the time to go, learn, and use what you learn. If they don’t provide this, take the initiative to enroll in some online classes at the very least, or maybe check out some local college courses.
Focusing on improving yourself through your career can not only make you more valuable at your job, but it can set in motion a general direction of self improvement and make you happier in other areas of your life.
Do you hate your job and think it’s not worth the time to get better at it? Maybe it’s time for a career change. Again, educating yourself is a ticket to improved wages and working environment.
Note: The section above is very much theory-only because I work from home.
However, what I DO have a lot of experience in is self improvement just for the heck of it! I have taken many classes over the years in various subjects based on interests I have. I took some personal finance classes at the local college, I took a 6-week real estate investing course online, and even learned to do a bit of coding through online tutorials.
If you love learning, and haven't discovered Lynda.com yet, be sure to check it out! One price gets you access to hundreds of different online courses in video and written format. It's a fantastic place to learn, and you can't beat the price of $25/month or $250 a year for full access.
Lynda does require that you are self motivated and focused though. It's really easy to just flip open a tab and watch a YouTube video of cute cats instead.
The smarter you are in your field, the more you're worth to an employer. Invest in your mind.
3. Improve Your Home’s Energy Efficiency
If that cash is really burning a hole in your pocket, this is probably the most entertaining way to invest your tax refund AND set yourself up for a a better financial future. It’s fun ‘cuz you get to buy stuff!
Having an energy inefficient home is going to be a drag on monthly bills, year round. You’ve got to stay cool in the summer and warm in the winter, and making this more efficient can reduce the amount you pay.
Get the windows and doors properly sealed. Buy a new water heater or air conditioning unit. Heck, even an energy star washer/dryer/fridge/dishwasher to replace that clunky, decade old one could help cut some energy bills and improve your quality of life at the same time. Leaky faucets, hoses, or toilets are another area where you could be losing money on a daily basis, especially in drought areas like California.
Buying something like Nest or a similar home automation system could give you more control over energy bills, and ideas on how to save. Technology is creeping into our homes bit by bit, so there's no use resisting!
Not only do these things save you money, but some of these improvements can actually increase the value of your home. Plus, you can really get stretch that tax refund by watching some YouTube tutorials and learning how to make these improvements yourself, instead of paying someone $50/hour to do it.
Money saved is money you can use on important things down the road like family, career, or education.
4. Start An Online Business
If the above 3 don’t really apply to (or interest) you, then you might want to consider starting an online business with the money from your tax refund.
Creating a website is easier than it has ever been, many people using push-button software like WordPress to create a site instead of the HTML coding from decades past.
It costs just $11/year to register a domain name, which means this is a very low risk investment. In contrast, starting a brick and mortar business can stop $100,000+ in loans just to get started!
There are many types of 100% online business models, some of which require no inventory.
Creating a digital info product based on a skill you have is one option. Drop shipping is another popular model.
My personal favorite, and how I actually earn money working from home, is called affiliate marketing.
In a nutshell, you publish articles to your website about a very specific industry of your choice. These articles can be based on personal knowledge or research you do reading forums and blogs online. Based on your knowledge and research, you make product recommendations relevant to the industry you write about.
It’s not hard to understand that companies will pay you to recommend their products, and pay a commission for each sale you make!
You choose what to recommend, and how to recommend it. In a sense, you are a freelance advertiser, using your portal as an information and product recommendation hub.
That was just the quick explanation of how everything works, but you can learn more details at this online business training center, where they specialize in training people to build this type of website. It’s $47/month for training and support, but they start you off with a free account so you can see what’s going on inside the community before paying for anything.
Less than fifty bucks a month to learn how to build a business that costs only $11/year to run isn’t a bad deal at all.
Bonus: Start Or Add To A Retirement Account
I really wish I could make a whole-hearted recommendation to invest your money into stocks…I do think investing is important, but this advice comes with a bit of a caveat.
The stock market is at all time highs right now. It’s impossible to tell whether it’s going to keep growing as the economy improves, or whether it’s going to take a nose dive when the Fed starts to raise interest rates.
Personally, I think there’s a lot of risk with putting a bunch of money into stocks right now.
However, if retirement is still a few decades off, stashing away some money in a traditional or Roth IRA is not a bad idea. Even if you do lose money in the short term, dividends and the propensity of the market to right itself over time means you’ll almost always make money in the long term.
Getting that refund money into a retirement account means you’ll have less of a chance of taking it out. Get it in there, then forget about it til about 30 years later.
So, what's the plan? How are you going to invest your refund this year?
Me? I actually owe money into the system so I've got to write the IRS a big fat check.