Phil's Personal Finance Tip of the Day:
Smart Ways to Spend Your Tax Refund
4 alternatives to blowing the check on gadgets or getaways
By Jonnelle Marte | MarketWatch – Fri, Feb 15, 2013 10:04 AM EST
Despite the late start to the this year’s tax season, refund checks are already rolling in. About 75% of taxpayers are expected to receive refunds this year, according to estimates from the Internal Revenue Service, with the average check coming out to about $3,000. And as this winter windfall arrives, Americans wrestle with competing desires to spend, save, or invest the cash.
Many people say they are being responsible with their refunds: 42% plan to use the money to pay down debt and cover bills and 25% plan to save it, according to a 2012 survey by TurboTax. Others are splurging: 15% of taxpayers plan to treat themselves to a vacation or shopping. But advisers say that even if you’ve done everything right—you have an emergency fund, no debt and are maxing out your retirement account contributions—you might want to reconsider spending the refund on a 70-inch TV or a cruise. Here are some of their suggestions.
Rebalance your portfolio
With the stock market hovering near five-year highs, advisers normally would recommend investors rebalance their portfolios by selling stocks and using the proceeds to buy bonds or whatever assets they need to get back to their target allocations. But some investors might be able to rebalance without selling their stocks — if they use their refund money to build up their exposure in those areas, says Steve Billimack, managing director at the HighTower Chicago Advisory Group. “And it’s a very tax efficient way to do it because they’re not selling anything to rebalance,” says Billimack. (Investors typically need to pay taxes when they sell assets that have risen in value.)
Prepay your bills
Even if you’re not living paycheck to paycheck and could afford to spend your refund on a new iPad without falling behind on your bills, there may be better uses for the cash. Though it’s not nearly as exciting, one can use the money to pay off future bills, says Jon Beyrer, a financial planner in San Diego with Blankinship & Foster. “Why not use this money to put yourself ahead of the game?” says Beyrer. Prepay six months of car insurance bills or car loan payments. Write the phone company a large check, or save the money for the home insurance bill you know is coming up in a few months, he says. But don’t forget to check monthly statements to be sure you aren’t paying for something you didn’t request, experts say.
To read the entire article from MarketWatch:
http://finance.yahoo.com/news/smart-ways-spend-tax-refund-191559846.html
We all have dreams. But in order 2 make dreams into reality, it takes an awful lot of determination, dedication, & discipline. -Jesse Owens
No comments:
Post a Comment