7 Ways to Invest Your Tax Return

by Don Smith

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Many are thinking about the fun toys they'll get with their tax returns in the first few months of each year. That's one way to live life, and I'm the first to admit that it's fun to blow money, but it's also an excellent way to get stuck living paycheck to paycheck. 

If you want to break that cycle, you need to think about how you can invest any extra cash you get. Here are some ideas for how to use your return so that it brings you even more money or happiness in the future.

Ideas for Investing Your Tax Return

  • Debt: If you have any high-interest debt, get rid of it. With average credit card rates of 19%, it's a guaranteed return on your investment.
  • Coaching: I'm starting to get a regular stream of people signing up for private coaching, saying they will begin as soon as they get their tax return. I'm biased, but having helped many significantly increase their income or scale their business, I think it's a fantastic investment.
  • Education: The right education or certifications can also dramatically increase your earning potential producing tens of thousands of dollars in additional revenue every year.
  • Stocks: The stock market is usually the first thing people think of when investing money. It's one of the few genuinely passive investments, and putting extra money into your investment accounts is usually a good move any time you can. The only downside is that it is one of the weaker investments with a long term average annual return of only 7% compared to investments in increasing your income which may produce returns of 1000% or more as outlined in “The Insane Math Behind Investing in Yourself.”
  • Rental Property: Rental properties continue to be a good investment in many areas and have made many people millionaires over the years.
  • Private Business: A full forty-seven percent of millionaires are business owners, according to an article in the Economist. Many of my clients are investing in their business with their tax returns.
  • Vacation: Not all returns can be measured in dollars and cents. Sometimes taking time out with your spouse or family is a wise investment and one that will be remembered much longer than any toy you can buy. If you are happy with your current financial health and work-life balance, seriously consider this investment.

Will you invest your return this year in things that will bring you more money or happiness in the future? Or will you waste it on something you will forget in a few weeks?

About the Author 

Don Smith

Happily married with five kids, Smith owns a technology company, is the founder of this site, has served on the board of directors for multiple companies, and loves playing soccer, hiking, and mentoring.

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