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  • SiekmannCo

Spending Your Tax Refund: 5 Tips for Success

Updated: Mar 29, 2021

With 2020 at a close, it’s time to get life back on track in 2021. Tax refunds are around the corner which offers a great opportunity to take some steps to improve your financial position. Saving and or investing your excess money can be a tough and intimidating habit to participate in, but by taking a few simple steps to get started you stand a great chance to set yourself in a better position for the future.

1. Take Advantage of Free Money - Take some time to review your current withholdings for your company retirement and benefits programs to ensure you are currently in a position to earn all match and employer contributions available to you. Whether it is a 401(k), Health Savings Account (HSA), or other wellness incentive programs, do not leave free money on the table.

2. Pay Off High Interest Debt - From student loans to high interest credit card debt, free yourself from the crippling interest obligations associated with your prior debts. High interest payments can stifle your ability to break into financial freedom and start accumulating wealth for you and your family. If you cannot pay down the debt, take some time to review other options to consolidate debts or transfer them into lower interest programs. Spending less on future interest payments also frees up future cash flow (income) to spend on life’s necessities and luxuries. Keep in mind the low interest rate debt such as a home mortgage may be perfectly acceptable to maintain, but it is important to consult with a trusted financial professional to evaluate your individual situation.

3. Create An Emergency Fund - If we learned anything from 2020, it is that &#!@ happens; you need to be prepared for what life throws at you. Whether it is taking care of unexpected car bills, transportation troubles, or a transition to a new job, a little bit goes a long way. Industry experts recommend having at least 4-6 months of your annual income on hand to pay for unexpected bills and loss of income. Having an emergency fund on hand also helps avoid the temptation of racking up more high interest debt in the future, but remember this money is for emergencies (fashion emergencies don’t count 😊).

4. Invest For The Future - Consider increasing contributions to your retirement or brokerage accounts such as a company-sponsored 401(k) or Roth 401(k), Individual IRA or Roth IRA, or standard investment account. Getting started early and increasing your savings are the two best ways to achieve your retirement goals. Keep your investing strategies simple and aligned with your desired risk tolerance to avoid any unintended consequences of poor investment results. When in doubt always ask a trusted financial professional for advice and best practices.

5. Update Your Assets - That tax return can go a long way to finishing off some of those home projects that have been on your list for years. It is smart to continue to make small, but meaningful improvements to your home over time. The home for most people may be one of the largest assets they ever own, and we want top dollar when the day comes to sell it. Not to mention we spend an enormous amount of time in our homes, and trends are shifting to more work-from-home abilities. Make yourself comfortable and efficient working from home.

Bonus: If you are still reading, you are ready to take a moment and enjoy time with your family and friends. Life is short and we all need to take some time to enjoy our hard-earned money.

There are risks involved with investing which may include market fluctuation and possible loss of principal value. Particular investments may not be suitable for certain situations or individuals. Carefully consider the risks and possible consequences involved prior to making an investment decision and consult with trusted financial professionals before participation.

The Siekmann Company is a registered investment adviser. A more detailed description of the company, its management and practices are contained in its “Firm Brochure”, (Form ADV, Part 2A). A copy of this Brochure may be received by contacting the company at: 9000 Memorial Drive, Plain City, 43064, Phone (614) 873-5200.

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