Wednesday, March 23, 2011

Put your tax return to work

Tis the season to get tax returns and I love it. I do not advise giving the Government interest free loans but since you most likely did it this year what can you do with those funds?. If you are like me you have spent that uncollected/ or recently collected tax return three times over in your mind(we bought our first home so we are expecting a much larger than usual return because of the tax credit). It's hard to decide where the money should be allocated. So here are a few ideas that I suggest that will build your net worth.

1. PAY OFF DEBT: Debt is the most crippling aspect of most Americans finances. So pay off a debt in your debt snowball and add that extra minimum payment to your next debt. Decreasing your debt lowers stress levels and builds your net worth overall by decreasing your liability. 

2. Open a Wroth IRA: Planning for retirement is extremely important and its never to early to start. Especially when it comes to compound interest. So open an IRA and start contributing to it regularly it will increase your net worth and help provide a comfortable retirement. 

3. Tired of that dated bathroom or 70s kitchen, remodeling is a great way to increase your homes value which if utilized correctly can be a valuable asset. Here is a list of home improvement projects that you could do with your tax return. The highest ROI is actually an interesting one. 

HomeGain surveyed nearly 600 real estate professionals nationwide and configured a list of the top 10 do-it-yourself home improvements that cost under $5,000 and benefit sellers most when they sell their homes.
According to the HomeGain survey, the top five home improvements that real estate professionals recommend to home sellers based on average cost and return on investment (from highest to lowest ROI) are:
1. Cleaning and de-cluttering – ($290 cost / $1,990 price increase / 586% ROI)
2. Lightening and brightening – ($375 cost / $1,550 price increase / 313% ROI)
3. Home staging – ($550 cost / $2,194 price increase / 299% ROI)
4. Landscaping – ($540 cost / $1,932 price increase / 258% ROI)
5. Repairing electrical or plumbing – ($535 cost / $1,505 price increase / 181% ROI)
Cleaning and de-cluttering continues to rank as the top suggested home improvement (since the survey was originally conducted in 2000), recommended by 99% of real estate professionals, costing less than $300 and returning a value of nearly $2,000 to the home’s sale price, or a 586% return on investment.
Rounding out the top 10 low cost, do-it-yourself home improvements includes: updating electrical systems and/or plumbing, updating the kitchen and bathrooms, replacing or shampooing carpets, painting interior walls, repairing damaged floors, and painting the outside of the home.
The home improvement projects with the highest price increases to a home’s resale value are updating the kitchen ($1,265 cost / $3,435 price increase), followed by painting the outside of the home ($1,467 cost / $2,222 price increase) and home staging ($550 cost / $2,194 price increase).
4. Refinance your mortgage: Interest rates are still incredibly low and getting out of your 8% loan can save you hundreds even thousands of dollars over the long run. So take that extra cash and use it to pay the fees on the refinance. 
5. Invest in yourself: Could a specific certification increase your salary? Are you just a few credits away from that elusive degree you have been working on for the last decade? Use your return to help pay tuition as you go back to school to increase your talents and abilities. Choose things that your current employer suggests or you know will provide value to your resume. 
Last but not least adjust your with holdings so that less is being withheld from each pay check. Having the extra money on a monthly basis can really help you grown your net worth. It's not your public duty to provide the Government with yearly interest free loans. We plan on doing a combination of what I have listed and I look forward to telling you about it. 
I would like to hear about what you have done or plan to do with your return? 

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