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Lesson’s with an Accountant “Tax Refund”

Today on Lesson’s with an Accountant I am covering your Tax Refund.

It is important that we all be aware of positive ways to utilize our Tax Refunds.
Earnest has provided a wonderful graphic showing how to best use your tax refund.

Disclaimer: I am an Accountant but not a CPA, please consult your CPA before making any financial decisions.

I know many people who use their tax refund to go on vacation or purchase new items like TV or Furniture.  So when I saw the research above I was happy to see that 48% of people save their refund.

Earnest has listed some Dos and Don’ts on spending your tax refund. 

As an Accountant I love making plans for money (see Forecasting post here).  Earnest suggested plans make great sense.  Opening a ROTH IRA is a smart move.
What is a ROTH IRA?  How does it differ from a traditional IRA?

ROTH IRA – an individual retirement account that is tax free upon withdraw after age 59 1/2.
Simple terms you pay taxes now on the money instead of later.  A ROTH is a good account to set up for refund money since you won’t owe taxes on the money anyhow.

Traditional IRA – is a tax-deferred retirement savings account.  You pay taxes on your money only when you make withdrawals.

There are many great companies you can set up an IRA with, check with your bank or one of the big companies like Charles Schwab or Fidelity.  Companies like these will help you get started and invest your money based on a plan you create with a financial adviser.  I suggest if you don’t already have a financial adviser that you find one.  I worked for several years for a CPA and Financial Adviser who taught me so much.  Which is one of the reasons I am getting my Finance degree so I can add the Financial Adviser test onto the CPA exam I will take next year.  Typically you can set up a free consultation with an FA, and then work out a consulting schedule and fee based on your financial needs.  Be prepared as a FA will look at everything, so know where you spend your money before going to see them.  You can get organized with my tips on making a budget.


Which ever direction you take with your Tax Refund this year I hope you take these Dos and Don’ts into consideration.  Making 1 extra payment on a loan (like Student, Car, or Mortgage) can make a big difference in the interest you end up paying.  I also recommend you look at your highest interest items, like a student loan or credit cards.  You want your money to work for you.

I would love any feedback from you.  Questions you would like me to answer, topic suggestions you want me to cover.