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Don't buy a boat: How to invest your tax refund like a financial guru

Paid for by H&R Block

If a wave of anxiety washes over you when you think about tax day, you’re not alone — a recent survey found that a majority of millennials who file their own taxes worry about making mistakes or missing out on refunds. Not to mention all the forms! Enlisting the help of a seasoned tax pro takes care of the process itself, but then comes the refund. If you get a sizable refund this year, what’s the smartest way to handle the extra cash?

We worked with H&R Block and enlisted the help of Jeff Rose, a certified financial advisor and the founder of Good Financial Cents, to walk us through some wise money moves you could make this year (don’t blow it all in one place) to make that refund last — and grow — for years to come.

Credit: Carolyn Figel

Attack debt!

“If you’re getting a tax refund, let’s look at how much high-interest debt you have,” Rose says. Pay off this type of debt, usually associated with a credit card or personal payday loans, first because “you will never build wealth if you’re paying more in interest charges than you’re actually making in interest on your investments.”

Consolidate debt!

Whether you have any open lines of credit or a second mortgage, Rose says an alternative option would be to consolidate other high-interest rates and use your refund to pay it down.

It’s IRA time!

Rose advises those 35 years old or younger who don’t have credit card debt to open an IRA or Roth IRA and dump their refund there for tax-free compounding growth. “Any gain made from your investment is 100-percent tax-free. We’re talking huge savings of 30, maybe 40 percent off your gain,” compared to a regular investment account.

Fun zone!

Paying down debt is a priority, but you shouldn’t forget about having fun. “We’ve only got one life so you’ve gotta find that proper balance,” Rose says. Turn your refund into a weekend vacation, or a trip to a local theme park. “Investing in your relationship and your family is part of it, too.”

Pro tip!

Rose, a personal finance advisor himself, says he learned so much by simply hiring a professional to do his taxes with him. “Actually going to a tax professional who started asking me questions was so much more eye-opening, and I got so much more out of it, such as knowing what I could write off going into the new year,” he says.

Stay involved!

A professional can also help you evaluate your taxes to see if you can withhold differently to get less of a return. Why? It’s money you keep that you can put into an account that will earn interest throughout the year, versus a tax refund, which is money you’re owed by the government. Still, Rose doesn’t dislike a refund. “It’s like an unexpected surprise that you get at the end of the year.”

Feeling risky?

“I think the biggest risk that could have a huge payoff is investing into a business,” Rose says, such as opening up your own storefront in an online marketplace, investing in your own online brand, or even investing in someone else’s business or franchise.

Source: Yahoo! Finance

From H&R Block:
H&R Block believes everyone deserves better tax prep. That’s why H&R Block provides upfront, transparent pricing, the most ways to file your taxes, and help whether you file in person or online. Visit hrblock.com to learn about all the ways Block has your back.