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This is income tax season and many of you may be waiting for your income tax refund cheque. (If you owe the government money, stay tuned, I’ll bring it up in a post soon).
Money does not grow on trees – well paper does – but you can make your money grow when you use these tips.
It’s so tempting to think of the income tax refund as play money. The tighter the budget, the greater the temptation, but I beg you to look at ways you can make that money work for you.
You’ve all heard how it’s not how much you make but how much you save and it’s absolutely true. Spending more or as much as you make will leave you penniless and possibly homeless.
We women outlive men. We women usually earn less than 75% of what a man earns. The chances you will find yourself widowed or divorced are greater than the chances you will win at the lottery. Women make up a large percentage of the poor after age 60. Being poor in retirement sucks.
Before you decide where you will allocate your income tax refund, look at your financial picture. What you owe, what you own, your savings, your investments, your age, your prospect for higher income, or not in the future, etc
This is important because of at least one reason. If you don’t expect your retirement income to be very significant, you should probably invest in a non registered retirement plan (Roth IRA (Us) TFSA (Canada) so as not to cut yourself from government supplement at retirement. Do consult an advisor and inform yourself as to what is best for you. Knowledge is power.
The first tips is to pay down your debts, but do keep some money to fill up your emergency fund too if you either have no emergency fund to speak of (like if you only have a few dollars saved). In other words, don’t put all to reducing your debt because that will leave you at the mercy of credit should an emergency happen and it would just add to more debt.
- Pay your debts. Pay your credit card balance, your student loans or what you owe to your parents. Start by paying the debt with the highest interest rate because that’s the one that steals the most money from you. See paragraph above about saving some too, even if you have debts to pay.
- Fill up your emergency fund. First get it to $1,000, and eventually to having 6 months living expenses. Imagine how free you will feel if you lose your job, or have medical emergencies.
- Start a saving account or add to the one you already have. Emergency fund is for emergencies. Savings is for: a planned trip, a wedding, buying a house, a big celebration, changing your car, home improvements, etc.
- Start investing for your retirement, add to your retirement fund. The younger you start, the better for you as you will reap the rewards of compound interest. Match your employer’s share and invest in a IRA or TFSA. When you can no longer make money you will thank your younger self for having had the forethought of taking care of you.
- Invest in your education. Whether in a course to help you get ahead in your work, or classes to prepare for another career. I invested heavily in my education as a adult and it has allowed me to change career and find work I loved. It has also allowed me to retire early and have a home business as a psychotherapist and life coach, and finally it is allowing me to continue working with this blog. I am a big advocate of finding work you love so whether or not you make big money, you are excited to get up each morning.
- Start the side business you’ve dreamt of for so long. Retirement can be for 20, 25 years. If you have the energy and you don’t do much, you will be bored to death!!! A side business can keep you mentally and physically active well into your golden years.
Then, keep a little to:
- Treat yourself to something you’ve wanted for a long time. Put a limit on it, like 5% of the income tax refund is for fun, 10% max(that’s if you have a very small refund). My refund this year is $8.34 so I’ll spend it all.
- Treat someone you love to a a small gift, a meal. Limit: 5% or 10% max
- Congratulate yourself for having done what’s best for you.
Is your income tax refund money free money? In a way, yes as it can get you to financial “free-dom” much sooner than expected.
I hope I have convinced you to take action now to improve your financial wellbeing. If so, please let me know, and do share this post on social media to help me reach more women.
Add even more to your nest egg by earning money while shopping
Related posts: http://www.makesenseoflife.com/emergency-fund/
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