April 15th is quickly approaching. Many people are panicking to assure they get their taxes done before being penalized by the Internal Revenue Service (IRS). Some are fortunate enough to actually receive a return this year. Unfortunately, no matter how hefty the sum of return, a lot of families will frivolously blow through whatever monies owed them by the state and federal government on material things that can be done without (i.e., designer shoes, name brand clothes, flat screen televisions, etc). Now…I’m not saying having nice things is all bad but sadly, investing is the last thing on the minds of some. People often times feels as if they “have time” and can therefore wait to begin securing their families financial future. How wrong is this theory?!
For those who are considering using their returns wisely, here are some suggestions to get the ball rolling on some much needed savings.
- Create a “wealth building” account. This is money specifically for retirement. Many jobs don’t offer “pensions” any longer and often times those who work for corporate America are left to religiously spend their money on low performing 401K plans. With any long term account, you want to make sure that you have access to the highest rate of return possible.
- Establish a “short term” savings vehicle up to six months of income. This type of investment will allow you to save for unforeseen events, loss of job, disabilities, vacations, a new car…those short term horizon goals, usually 3-5 years. This is a great way to alleviate the possibility of you dipping into credit cards and creating unnecessary bills that you have to figure out how to pay off next tax season.
- Open an “emergency fund”. You always want to have at least 3 months of income in this reserve account. Purchases that you will make in 0-2 years, vacations and other emergencies can be funded with this type of account.
You should also consider setting up college funds for your children. Whatever it is that you do, just make sure that you save. Life will not always be as it is today.