It’s just two days until your 2007 income tax return is due. I hope you’ll have the pleasant surprise in the form of a refund instead of a tax bill. Add your tax refund to the tax rebate you’ll receive in May (February 17 column) and it’s likely to be a tidy sum. Have you given any thought to what you’ll do with this ‘found’ money? Here are my 10 best suggestions:
-
Contribute to your 2008 IRA. The amount that you can contribute for 2008 has gone up to $5,000 plus an additional $1,000 if you turn age 50 or older in 2008. By making an early contribution, you’ll get your money working for you several months sooner. In the long run, this can add up to big bucks. For example, if you are age 25 and contribute $5,000 now verses this time next year, you’d have an additional $20,000 by age sixty-five assuming you earn 10%. Choose either a deductible or Roth IRA if you expect to qualify, otherwise, use a non-deductible IRA. For a detailed discussion, go to the ‘In the News’ section of www.welchgroup.com and click on ‘Stewart’s Weekly Column’ (March 30 and April 6).
-
Invest in your child’s education. The 529 college savings plan remains one of the best deals around. While your contributions are not deductible, growth on your investment is tax deferred and withdrawals for qualified expenses are tax free. For more information, go to the ‘
Resource Center -
Invest in your education. One of the best investments you can make is in furthering your education. There are many wonderful courses on investing, personal growth, health and happiness.
-
Start a gift fund. Before you know it, the holiday season will be upon us. Why not consider getting ahead of the game by earmarking your refund for future gifts you know you’ll be giving?
-
Reduce credit card debt. Review all your debts and apply your refund to the debt that has the highest interest rate, which is typically a credit card. Remember, if you pay down a debt where you are paying 18% interest, it’s just like earning 18% on your money. Not a bad rate of return!
-
Start a contingency reserve fund. If you don’t have money set aside for unexpected expenses, now’s a great time to do so.
-
Make home improvements. Soon, the sweltering days of summer will be upon us. Consider projects that improve the energy efficiency of your home such as adding attic insulation, seals for windows and doors, servicing your air conditioning system, or purchasing energy efficient appliances. That way you can continue to save money all year long.
-
Join a fitness club. If you are fully committed to sticking with a fitness program, this could very well be the best money you spend.
-
Start a long-term savings account for big ticket items. Whether it’s a car, furniture or vacation, start a savings plan now, seeded with your tax refund and rebate. Then set up an automatic deposit into the account from each paycheck. This way you can avoid taking on more debt for these types of purchases.
-
Give to charity. If you feel blessed, share the blessing! Not only will you feel good, but you’ll have a tax deduction for this year!