Report: Wife Scratched Tiger Woods' Face, Chased His SUV; Update: Police Unable To Interview Couple Today
Senate Report: Bush Missed Chance To Catch Bin Laden
Dogs Rescued From Puppy Mills And Shelters Arrive In L.I.
State Dinner Party Crashers Want Money For Interview
Tiger Woods Says "Embarrassing" Accident Was His Fault
I just did my taxes and I am going to get a refund this year. I'd really like to get a fancy toy, but I feel like I should do something responsible with the rest. What are your suggestions?
First off, congratulations on your refund! We are a firm believer that you should not feel guilty about treating yourself for a year of hard work. However, it's also very important to not overlook some important decisions you can make with this money.
Number one, pay down any high-interest debt that you can, such has credit cards. The sooner you can reduce debt, especially of the high-interest kind, the better. That will improve your credit score and lead to more money in your pocket anyway. Secondly, start thinking about investments. Does your company offer a 401k plan, and more importantly do they match contributions? That's a great way to invest in your future. An individual retirement account (IRA) is an additional way you can save your money. You can't touch the money you save in your IRA until retirement (with some exceptions such as medical emergencies or buying a first home), but this is a good way to make sure you actually save! As a bonus, you have until April 16th this year to make that IRA contribution.
You could also house it in a high-interest savings account, such as an ING Direct account which currently boasts an interest rate of 4.5%. Some banks also have high-interest savings accounts. Citibank, for example, has an e-savings account with a 4.75% APY. You could also put your money in a CD (certificate of deposit) for a fixed term. Bankrate.com gives a list of 10 things to do with your tax refund, which includes things like servicing your car and investing in stocks.
Lastly, according to Forbes.com, if you got a hefty refund, you should recalculate your withholding so that it doesn't happen again next year. Sound shocking? Well, as they put it, the interest rate on the overtaxation of your check is zero. If you were getting that money in your paycheck and having it automatically deposited in a savings account, even $25 per week could add up to $1,300 per year. Pretty convincing if you ask us.
How are you planning on handling your tax refund?
Questions to Ask Gothamist can be emailed to ask(at)gothamist.com
add to stumble upon
add to reddit
tweet this
post to facebook
$7000 for bills and credit cards.
$3000 for fun.
First off, congratulations on your refund!
Why are you congratulating people for giving the government an interest-free loan? You should work out your withholding better in the first place to avoid getting a refund.
ORLY, read the entire post before commenting!
In re: buying stock - does anyone recommend a good way to do it? I don't plan on making trades with any regularity; is Etrade or something similar the thing for me?
John, I use Ameritrade. It has a few less bells and whistles then E-trade but is cheaper per trade. Perfect for an infrequent trader (I make maybe 4-5 trades a year). And the only things missing are research related and you can get that anywhere on the internet.
asking for financial advice on a gothamist board is almost as stupid as taking the advice seriously.
Don't go the simple route and buy an expensive gizmo. That is lame.
Go on vacation. Berlin, London, Barcelona, etc. The memories will last much longer than your gizmo.
Scottrade for stocks, best and one of the cheapest if you don't need handholding and you trade infrequently.
As for the refund, I say spend it all on fudge.
Pay back CC debt, if you don't have any, contribute to an IRA. Simple, those two pieces of advice takes care of most people.
1. I think the ING high-interest account requires a high balance, more than your question asker is likely to receive back from Uncle Sam.
2. You can't usually put your own cash in a 401k. It comes out of your paycheck, pre-tax, and is typically matched by your company. A 401k wouldn't help someone who suddenly found a big check from the IRS.
Does Ask Gothamist do any research with experts before it answers questions?
hsbc has an online only savings account with no minumum and 5.05% APY.
I think the page is www.hsbcdirect.com
Uh, the ING account has no minimum. Do some research before writing snarky comments.
I second #11's comment about hsbcdirect.com.
Wrong about people not being able to put their own $ in a 401(K), but that's not really the point. The main advantages of a 401(K) are a)company match and b) the tax benefit of your money going into your 401(k) investments before taxes. After contributing as much as your company will match, it's better to go the IRA route.
Wrong, too, about not being able to touch IRA money. There are a few kinds of IRAs, the main kind being traditional and Roth. If you plug "traditional Roth IRA" into Google, you'll come up with a lot of pages explaining the differences. The first that comes up is from Fidelity, which explains that you can withdraw from your Roth w/ no penalty, depending. There are penalties to w/draw from your traditional IRA, but you can still do it. (Couldn't Gothamist interview one of the gazillion finance professionals in this town? It would do New Yorkers a service, and the information might actually be correct.) Here's the text from the aforementioned Fidelity info:
"Roth IRA contributions can always be withdrawn at any time without penalty. For Roth earnings and Traditional IRAs7, penalty-free withdrawals include but are not limited to: qualified higher education expenses; qualified first home purchase (lifetime limit of $10,000); certain major medical expenses; certain long-term unemployment expenses; disability; or substantially equal periodic payments."
Save, Save, Save !
Buy Buy Buy!
call ahead, have 'em ice up a cold one ....
Phase One: Collect Underpants
Phase Two: ???
Phase Three: Profit!
Umm... what are we talking about again?