While there is more than a month left before we all need to file our returns with the tax man, now is the time to start thinking about tax season. Many people look forward to a large tax refund to help their families, pay down debt or buy toys after the post holiday purchase slump. It takes many people an entire quarter to recover after spending for the holidays, so many people eagerly await a windfall with their taxes. However, a great deal of people spend the money that they get refunded within a month of receiving it and usually not on something that could be considered a long-term asset. Instead, most people play catch up or use the money to handle personal matters that arise in the first part of the year. The good news is that many people want to make smart decisions with their refunds and Factum Financial can introduce you to a savings vehicle that will electrify your plans for your tax refund.
How Most People Spend Their Tax Returns
In the past, a tax refund was an opportunity fund for many people to make major purchases like home appliances, vehicle repairs and upgrades or recreational hobby equipment. However, over the last two years, habits have changed and now almost 20% of people surveyed will bankroll the funds for a rainy day, while many more respondents planned to save their tax refund in the short term for an upcoming purchase. Almost half of respondents want to use their refund to pay down debts.
An alarmingly honest picture of the complications of the U.S. health system is that annually there is a 60% rise in healthcare spending around the time that people receive their refunds. Overall, even though it seems like it might be the time to see a bump in discretionary spending, the data indicates that people want to do something different with their money this year.
The bad thing about all these solid plans for a sudden windfall of cash is that there is lost opportunity cost. If you have money to be used for a rainy day, we can’t stress enough how solid that decision is and most people don’t even have that. However, if your money just sits in a regular account or even a CD, it will make a marginal percentage of money back on the money you put in. Some people put their money towards their retirement savings, but a combination of market volatility and deferred taxes on money that you will need in the future could actually cost you more than you put in after the long haul. You always need to question whether or not your 401(k) savings plan is the best option for your money. So what can you do with your sudden windfall?
What You Can Do Differently
This year, you could do everything that you want to do with your tax refund without having to swallow the opportunity cost left on the money you used to pay down debt or make that hot tub purchase or even just banking the funds in a low interest savings account. Opportunity cost is the loss of potential when you spend on one item or essentially what you could have spent that money on if you didn’t use it one area. For example, when you pay down debt, the opportunity cost is the opportunities you lose giving that money over to your debtors, However, there is a wealth savings and growth vehicle that’s been used as a method for protection and growth by some of the world’s wealthiest families and most economically literate politicians. You can turn your tax refund into a cash-flow system that truly protects your money from taxation, not just storing it in deferment for a later date where the tax rate will be higher. With your cash flow system, you take over the banking role in your life. Imagine not having to go to a bank with the hope they might approve you for an auto-loan when you can loan the money to yourself and then earn back the principal plus interest over time. This is the year to make a change and it can start with your tax return when you connect with the team at Factum Financial.
Making Your Money Work With Factum Financial
The team of wealth strategists at Factum Financial are standing by to help you now. Make the most of your tax refund this year and reward yourself with the gift of financial freedom. Contact our team before the end of tax season so you can get started now.
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