Refund Anticipation Loans Are Not Wise!

Good morning!

If you live paycheck to paycheck, like the majority of Americans, you really look forward to your tax refund.

I’m a big proponent of investing at least 20% of your refund in the stock market.  But the reality is that most people’s tax refund will go to catch up on past due bills or some other “emergency”.

Many tax services, such as H&R Block, will offer you the opportunity to get your refund immediately.  Now if you’re in a financial bind, I understand why you might do it.  But it’s not wise.

Let me explain.

You work all year for this tax refund.  This is your money coming back to you.  If you opt to receive a refund anticipation loan, you’re going to pay interest on the money you’ve earned over the last 12 months.  That makes absolutely no financial sense at all!

Decisions such as taking out a loan against your tax refund have contributed to your poor financial situation in the first place.  Start making good choices.  Be patient enough to wait to receive your full refund.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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Ask Wealthy Joe: I Can’t Afford To Invest! Seriously, I Can’t!!!

can't afford to invest

A: Fact: 20% of your income determines 100% of your wealth.

Whether you make $45,000 or $1,000,000, what you do with your income, as well as debt, are the two biggest factors.  I have written a number of posts on this topic.

It’s a reality, though, that some people are unable to save any money throughout the year, despite managing their income responsibly.

My advice to people in your situation is to take 20% of your income tax refund and invest it.

Just 20%.

Start an emergency fund with the rest, if you don’t have one.  Pay down debt.  Use some of your refund for a vacation.  But invest 20%.

See, compound interest is an extraordinary thing.  It can turn $100 into $7000 over time.

That may not be life changing.

But if that’s all you can do for now, it’s better than doing nothing.

Please feel free to share your questions with me!  Email me here.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)