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Health & Fitness

Invest Your Tax Return

To many people, an income tax refund is one of the largest single cash receipts of the entire year. Avoid the temptation to spend the refund on consumption items. Instead, 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 $5000.00 tax refund. The best return on your investment may to be to pay off current debts with high interest rates. If you are carrying a credit card balance at 18%, a reduction of the balance is the equivalent of earning 18% return on your money. Your $5000 payment will save you $900 in interest expense over the next year. This is an outstanding return when compared with most other investments. If you leave the $5000 balance on the credit card and make only the minimum monthly payment, you can pay up to twice that amount in interest. 

A second choice may be to pay down the principal balance on your home mortgage. A $5000 reduction in a 4% thirty year loan will save $8,340 in interest. 

Consider putting the cash in to your retirement program.  Only one out of five Americans can retire with adequate resources to live independently. $5000 invested at an annual 6$ compounding return will be worth $28,000 in thirty years.  Your retirement income could grow to almost $450,000 if you invest $5000 each year for 30 years at a 6% compounding return. 

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