More than 40 million Americans have already received good news. Not only have they cleared their debts with the taxman, but they are about to get a fairly sizable refund check! Financial expert Mark Lamkin from Lamkin Wealth Management says the smartest thing to do with the money is to stash it for retirement, contribute to an emergency cash fund and pay down debt.
But if you're going to spend the cash, you might as well spend it wisely. The average tax refund is down about $300 because of multiple tax increases tax payers are facing this year. The average refund in 2013 is expected to be approximately $2,700. Here are some things worth spending your refund on:
1. Buy a gift card
For example, TurboTax customers can get a bonus of 5% to 10%, if they use their refunds to buy Amazon.com gift cards. Cards must be purchased in increments of $100 and the amount added will depend on the service used. Consumers can also use their refunds to find discounts or bonuses on gift cards from other retailers. As Lamkin recently reported, people can find discounts of 10% to 20% on gift cards for AMC Theatres and Regal Cinemas on Gift Card Granny, a site where people can buy and sell gift cards. IF you're going to spend your money, let's maximize it!
2. Invest in YOU
Invest in your career. Getting a big promotion or shifting to a higher-paying career often requires developing new skills. Spend money on continuing education courses, a weekend conference or an online class to learn a new skill. By spending money on improving you, you may become invaluable to your employer and get that raise, promotion or at the very least create job stability.
"Many continuing education courses start at just a couple of hundred dollars," says Lamkin and both University of Louisville and Bellarmine both have GREAT adult education departments. "Invest in your education and you'll have more earning power in the future."
3. Prepay bills
Get ahead of those monthly car insurance payments or the soccer lessons your son wants to take in the spring, says Lamkin. Many companies offer as much as a 10% discount if you pay in advance. If you decide to do this, please check on the companies history and BBB rating. This approach works best when paying a bill up front might also lead to a lower total price tag, such as paying down a car loan to reduce the total amount of interest that would be due, says Lamkin. But it can also make good financial sense when the expense - say, buying new tires or brakes for the car - can lead to lower spending down the line, he adds. "That way you can keep the car longer," he says.
4. Spruce up your home
Taxpayers might use the money to replace old appliances, such as a dishwasher or air conditioner, or to remodel a kitchen or bathroom. Spending the cash on home improvements could also help maintain, if not lift, the home's property value. "You almost never lose money by investing in your home," says Steber. And people who make changes to make their homes more energy-efficient may qualify for a tax break. Make sure you're not the most expensive in the neighborhood and you're investing in projects that get a good rate of return if you plan on moving in the next five years, Lamkin says.
5. Treat yourself
I always recommend a small percentage of tax refunds for "wasteful" purchases that feel good! Going further, if you are using a refund to book a flight to Europe or buy a new TV, it might be a smart decision for you if it means you will avoid dipping into savings or taking on credit-card debt for the purchase. It can also be a reward for paying down debt and other expenses, he says. "If you're taking care of your home and your family and some of your other liabilities, splurge a little bit on yourself," he says. But be aware, he cautions: Some taxpayers may end up losing money in the long run if they spend the cash instead of using it to pay down debt, since interest will continue to pile up.
6. Add to your retirement account.
You have plenty of options for stashing money away for your retirement years, but in general you'll want to first max out any account that includes an employer match. The free money is just one of the benefits, says Lamkin. "Most of the time, that money will come straight from your paycheck so you won't even see it," he says. A great way to jump start your retirement.
Lamkin Wealth Management
5151 Jefferson Blvd., Suite 102
901 Lily Creek Drive Ste. 102
office: 502-961-6550 Office
toll free: 866-961-6550
"Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and an Investment Advisor"