3 Smart Financial Moves to Make with Your Refund
Getting your tax refund check in the mail is a great feeling. The government sent me money? Hell yes.
But, before you rush out to spend it on a new video game system or a ticket to London, let’s push pause. This is not just money the government decided to send you for being cool- this is actually your own money coming back to you. You put in the sweat equity to make this green. How can we use it to make your overall financial life better?
Because remember; Latinxs are up against a financial wall. In the US, more Latinxs lost their houses and mortgages during the 2008 crash than any other demographic, and 16.2% of Latinxs were completely unbanked in 2015. (Unbanked means they have NO bank account whatsoever, and it’s a very bad thing.)
The Latinx population is only growing in the U.S., we have to make sure our financial power grows as well. Money talks in this country, so let’s make sure we have something to say!
I want you to have all the things you want in life. But I also want you to have a serious financial foundation to stand on. Using your tax refund to make smart financial moves is one way to do just that.
1- Pay off debt
Eight out of ten Americans have some sort of debt. We really are one nation, under debt. From credit cards to student loans to mortgages...literally almost everyone has some sort of debt.
If you carry high interest debt, you should use your tax return to pay some of it off. High interest debt is something like credit card debt, or a payday loan. A high interest rate is anything over 10%, so if you’re paying 25% on your credit card, that qualifies.
When your interest rates are that high, most of your minimum payments goes to just paying the interest you accumulate each month. You stay in debt, and the company makes money off you. Get out of debt and reclaim that portion of your paycheck each month.
2-Boost your savings
Every person should have 1-3 months of living expenses saved up and tucked away in their emergency fund. Unfortunately, it can be really hard to save that much money in the first place, and even harder to just leave it there, waiting for the day you need it.
Having an emergency fund is critical to anyone’s financial health. It’s buffer money- the more you have, the less likely you are to go into debt when something unexpected happens. You car breaks down? Good thing you have $3,000 tucked away and don’t need to rely on your credit cards.
If you’re really strapped for income, use your credit refund to start the account. If one month’s living expenses seems totally out of reach, try and save $1000. That’s enough money to give you a little protection from an emergency.
3- Start investing
What if you’re debt free and have a fully stocked emergency fund? Then it’s time to start growing your wealth.
Everyone needs to be investing in the stock market. It’s the best way to beat inflation, and it’s one of the best ways to grow wealth over the course of years. Think about all the really rich people you know. I guarantee they’re investors. Bill Gates and Warren Buffett? They have investments.
A great place to get started investing is in your retirement accounts. If you have a 401(k) or an IRA offered through work, set up a meeting with HR to get it open and funded with your tax refund. You can also set up automatic payments from your paycheck so you can keep contributing.
If you freelance or your company doesn’t offer a retirement plan, you can start investing on your own. An IRA is an Individual Retirement Plan which is designed for any individual to open.
Currently, the brokerages with the lowest fees are Vanguard and Fidelity. Heads up; fees are subject to change at any point in time. Go to their websites and follow the instructions on opening an IRA. Use your tax refund to make your first stock purchase (look at index funds!) and you’re in business, baby!
There’s absolutely nothing wrong with buying something nice for yourself sometimes. But if you’re feeling anxious, depressed or frustrated about your finances, these are three moves that can help you get to a good money place. Making smart money moves will literally come back to you in the form of more money and less stress. Do yourself the favor of being good with money this year.
WORDS BY KARA PEREZ
Kara Perez discovered her love of finances courtesy of her quarter-life crisis. Broke, underemployed and saddled with student loan debt, she realized that her lack of financial education was crippling her adulthood.
After figuring out how to pay off her $25,302 in loans on a salary of less than $30,000, Kara created Bravely to help other women take control of their financial lives.
Kara’s writing has been featured on LearnVest, Elite Daily, Rockstar Finance, The Financial Diet, Glamour, and other publications.
To learn more about Kara Perez and Bravely please visit her website at www.bravelygo.co.