Make money with your tax refunds this year!
$3,125 is the average tax refund received by every American that paid taxes in 2020 for the tax year 2019 and a total of 49.8 million returns were filed for the same period. This amounts to a total of $1.65 Billion Unites States Dollars.
Many millennials took as some kind of gift money, booked themselves a cruise or a gateway tour, or spent this money on the things they usually would not spend on. They did not realize this is their own money returned back to them for overpaying in their withheld tax every month from their paychecks. This is the amount of money that could easily earn you 20% in stocks without any effort by just buying $3125 worth of SPY on Robinhood, WeBull, or any other retail trading app.
Here are some stats I am throwing your way to understand how the notion of reducing the amount of withheld tax has been becoming more popular every year, and how many people are now keeping that money with themselves rather than falling in love with the Tax Refund they receive next year. (Assuming, you pay taxes for 12 months, and you do not file taxes until March, so keeping this money with Government for well over 15 months).
| Tax year | Average tax refund (end of season numbers) | Percent change from same time period in the previous year |
|---|---|---|
| 2015 | $2,860 | +2.3% |
| 2016 | $2,763 | +1.9% |
| 2017 | $2,899 | +0.4% |
| 2018 | $2,869 | -1.4% |
| 2019 | $2,476 | -11% |
Here are some of the ways you can spend that money, and make it work for you rather than lending it to the government who then supposedly makes money from it.
Adjust your withholding tax amounts.
First, you need to change your W-4s and stop paying more in your withholding taxes. Calculate so that you roughly save the same amount you receive annually from tax refunds i.e. if you receive roughly $3000, you should pay a $250 less amount in your withholding tax every month.
Pay Off Your Debt
One thing I wonder here is, if you had debt, you would never have been paying that much withholding taxes, to begin with.
But, if you are owed money because of any credit card spending habits or your car loans, or other loans, you should consider paying them off immediately. $250/month by above calculations ain't much, but it certainly pays your debt by $250.
Contribute to Your Emergency Fund
If you already are paying $3000 more in your withholding tax, chances are you already have an emergency fund set up. An emergency fund does not need to depend on it anyway, no matter what, you should have an emergency fund set up, the sooner the better.
This is a rainy-day fund that will help you get back on your feet if you lose a source of income, you are laid down on your job, your business stopped making money or you faced situations like Covid-19. By my calculations, everyone should have a 6 months worth of Emergency month setup. If your monthly expenses are $3000, then your emergency fund should be $18000 at all times saved in your saving account. This should be enough to feed your family for 6 months until you find a way around your losses or you get a new job.
Invest
This is by far the best thing you can do with your money, but make sure you have no debts and you have an emergency fund set up before you decide to make money from $250/month. Open an account with a retail trading app like
Robinhood (very user friendly, easy to use for new investors) or with WeBull (a very comprehensive trading platform), or buy crypto-currency Coinbase or Bitterex.
You can buy growth stocks if you choose to invest in stocks, or you can even choose to buy Dividend stocks like AT&T and McDonalds that pay you dividends and they grow a little bit too.
You can choose to buy staking rewards crypto-currency and leave it to grow on its own, or you can invest in any good crypto-currency that grows very well i.e. ADA, Steem, BAT, XLM, XRP, ETH, LTC, and the main one BTC.
You can add an auto-buy or auto-deposit to your trading application and link it with your bank, which will keep buying for you every month, and you can come back a year later to see how much money you made. With dividend stocks, and the auto-reinvest-dividend options you will earn compound returns.
Save More for Retirement and Other Goals
Time to think about your future, and how you will live your life after your retire. After all, we do what we do to make our lives easy at certain times when we are not of the earning age. We should all enjoy this part of life for it's the last one alas!
If you have 401-K that's even better, but if you don't have it, I would suggest you think about opening one and weighing your options between Roth IRA and 401-K IRA.
Roth IRA is for the tax paid money, and then you don't pay taxes for the gains you make in Roth IRA, and 401-K is pre-tax money and you pay taxes after you withdraw your money when you are 60 years of age. 401-K is a better option if your employer contributes some money for you too and it does not have stocks or ETFs that you can buy, and Roth IRA is a better option if you know how to make money in stocks and ETFs and you can save money on taxes too.
Give to Charity
Be a philanthropist! this is about your heart. Some people gain much happiness by doing charity, others think of their after-life, and some are in it just for the fun of it. Choose the charity of your choice, donate some money only if you can afford to!
Start Your Own Business
Be a businessman, start a small business i.e. become an Amazon/eBay seller. With options like drop-shipping, you can find many opportunities. I am not an expert in this, but this needs your energy, dedication and time in the beginning, and you may even not earn any profits for the first few years. Go research!
Regardless of how much tax-returns you receive, the above tips apply to your other money saved in your bank account doing nothing. If you have more than your emergency funds, and if your debts are all paid off, you should consider using this money. There is no worth of money itself, the worth is of the money that changes hands regularly!
Disclaimer: I am not an investment specialist or anyone's fund's manager, neither am I forcing you to follow these suggestions. These are merely my thoughts and the decisions you make based on them are purely yours to own. This text should be treated for information purposes only and not as an investment suggestion.
It is actually easy to think that the funds was an extra money but then again we will be much happy if we use it for the good purposes that you have mentioned in this post.
This is Huge Metamask is releasing their own governance token MTSK and they are giving airdrop for their metamask users. If you done atlast one trade on Defi-exchanges you are eligible on this airdrop.
Want to know more CLICK HERE