Expecting a tax refund this spring? Up to 80% of us are, and will have to decide what to do with our tax refund of, on average, about $2,832!
Though it can be tempting to see a tax refund as “free money” (rather than what it actually is- part of your hard-earned paycheck,) it seems as though the vast majority of Americans do plan to treat the windfall responsibly, instead of blowing it on a splurge purchase.
Personal finance website GoBanking.com’s consumer study found that more than half of us plan to pay down debt or save our tax refunds, and that just one in five Americans will spend their refund on a consumer items, like a television or a new car.
As a law firm that specializes in helping parents plan for their families’ financial security, those are choices we like to see. Paying off high-interest debt and socking away your tax refund in an emergency fund or retirement account are two of the best ways to ensure financial stability. And, it seems, you already know that.
We know you want to always make smart decisions for your family and, in that spirit, we offer creative suggestions, beyond the common plan, for wisely investing your tax refund in your family’s future.
1. Invest in a comprehensive estate plan
Investing in a comprehensive estate plan just makes good financial sense. Working with the right attorney to protect your assets now can save your family tens (and potentially hundreds) of thousands of dollars in estate taxes and probate fees later. For example, in Massachusetts, a family with just $1 million in total assets can expect to pay almost $40,000 in estate taxes! $1 million may sound like a lot, but if you own a home and have a life insurance or retirement accounts, chances are you meet or exceed that threshold. Moreover, probate costs and fees will substantially cut into your estate’s total value and put your money matters in the public record, for anyone with an interest to view. In addition, great estate planning can ensure that the assets you pass down to your children can’t be lost to a future divorce or lawsuit. More than smart money, comprehensive estate planning protects your children, and can help you capture your intangible assets (who you are, what is important to you) so that they are never lost if the unthinkable happens to you.
2. Grow your human capital
You are your own greatest income-producing asset. Take steps to ensure you appreciate over time by investing in yourself. Unlike the stock market, you can influence your own rate of return by using your tax refund for additional training, coaching, and professional memberships that will lead to increased job security and larger future earnings.
3. Enter the “Save Your Refund” lottery
If your tax refund tends to really burn a hole in your pocket, go ahead and play the lottery. Well, not just any lottery. Drop just $50 of your tax refund into savings or a bond, CD, or IRA to earn a ticket into the Save Your Refund lottery. Weekly $100 winners are drawn, and there is a photo contest with a grand prize of $25,000. The program, from America Saves and the Doorways to Dreams Fund, aims to encourage saving.
4. Invest in the Greater Good
5. Make a Memory
If you must spend, purchase an experience and make a memory. Last year, 55% of working Americans didn’t take their vacation days. Not only is working non-stop bad for you, a recent study shows it can actually be bad for your career and our economy, too. Need another reason to make 2017 the year of the family getaway? We refer you back to investing in a comprehensive estate plan. Life is short, and the people in your life will appreciate the time they spent with you most of all.
However you plan to use it—plan. Come up with a smart tax refund strategy before the check arrives and your future self will thank the 2017 you. We can help you get started, if you’d like to use your tax refund to invest in a comprehensive estate plan to protect your family- no matter what.
Call our office today at 973-269-6900 and mention this article for a free two-hour Family Wealth Planning Session. We’ll discuss what you want to happen in all areas in your absence and begin to design a plan to give you peace of mind, knowing your family will always be taken care of in the ways you want.
P.S. Want to get started on the most important planning you’ll ever do for your family? Give our office a call at (978) 263-6900 to get started. You’ll be so glad you did.
David Feakes is the owner of The Parents Estate Planning Law Firm, PC – a law firm for families in the Acton, Massachusetts area. David helps parents protect the people they love the most. If you would like to receive David’s exclusive, free report, “Six Major Mistakes To Avoid When Choosing An Estate Planning Attorney,” you can get it right here.