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Financial Advisors Recommend Long-Term Investments for Tax Refunds.
May 17, 2010
Moultrie, GA, Linnea Wildenradt is one of 96 million taxpayers who will receive a refund from the Internal Revenue Service. She plans on using about half her $2,500 refund to pay down consumer debt and saving the rest.
“The money I put in savings may eventually go toward a home repair,” said Wildenradt. “But for now, I think it’s wise to save it.”
Eighty-four percent of Americans agree and will use refunds to pay down debt, save or invest their windfall, or use the money for everyday necessities according to a poll published April 5 by Bankrate, a financial data firm.
Thirty percent of Americans plan to pay down debt with their tax refund, 28 percent say they will save or invest it, while 26 percent have earmarked those funds for necessities such as food or utility bills. Only 7 percent plan to spend their money on a shopping trip or vacation.
Some think that since they are getting a refund, it’s OK to run out and buy that new high-definitionTV they have had their eye on. Financial Planners suggest otherwise.
Wayne Martin, Raymond James Financial Advisor at Ameris Bank in Brunswick, stressed that after paying down high-interest consumer debt, saving and investing are the most worthwhile things you can do with your tax refund.
“The first step might be working with a financial advisor to get a clear picture of your current financial situation,” stated Martin. “Thestablish and prioritize financialgoals and time frames for achieving these goals, choose specificproducts and services that are tailored to meet your financial objectives, and monitor your plan, making adjustments as your goals, time frames or circumstances change.
Some common financial goals are establishing an emegency reserve fund, saving and investing for retirement, saving and investing for college, and providing for your family in the event of your death.
“Many Americans are not prepared for retirement,” Martin continued. “A tax refund affords a good opportunity to start a retirement savings fund, but everyone should make a habit of contributing as much as they can on a regular basis.”
He warns that the biggest mistake would be to spend a tax refund on anything non-essential.
Another note to consider: If you are receiving a very large refund, it may be a good idea to consider adjusting your federal or state withholding so your paychecks are higher and you have more control over your money. A big refund just means you have given Uncle Sam an interest-free loan.
After you have taken care of all your obligations, a guilt-free trip to the mall may be justifiable.After all, a small splurge can be just as satisfying as a major purchase. But before then, consult a financial advisor to help you determine where that refund should go
5 Smart Uses for Your Tax Refund
- Bulk up your emergency fund.
- Lighten your debt load.
- Invest in your retirement.
- Make home improvements.
- Build an education savings account for your children or grandchildren.
For more information contact:
Steven Sturm
(803) 733-2699