Use your income tax refund wisely
To many people, an income tax refund might be one of the largest single cash receipts for the entire year. Avoid the temptation to spend your refund on consumption items.
There are several places you can invest the refund to enhance your long-term financial goals. You can pay off current debt, invest in the stock market, make home
improvements, or invest in a pension plan for retirement.
Let's assume you will be getting a $5,000 tax refund. The best return on your investment may well be to pay off current amounts you owe that have high interest rates. If you
are carrying a credit card balance at 15% interest, a reduction in the balance is the equivalent of earning a 15% return on your money. Your $5,000 payment will save you $750
in interest expense over the next year. This is an outstanding return when compared to most other investments. If you leave the $5,000 balance on the credit card and make
only the minimum monthly payment, you can pay up to twice that amount in interest, depending on your interest rate.
A second choice might be to pay down the principal balance on your home mortgage. A $5,000 reduction in a 4% thirty-year loan will save $11,000 in interest expense over the
life of the loan.
Consider putting the cash into your retirement program. Only one out of five Americans can retire with adequate resources to live independently. $5,000 invested at a 6%
compounding return will be worth $28,000 in thirty years. Your retirement fund could grow to almost $450,000 if you invest $5,000 each year for thirty years at a 6%
compounding return. Have you ever heard anyone say that they retired with too much money?
Please give us a call to discuss this or any of our other topics with you, so we can address your specific requirements.
DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com
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