5 Things I Plan to Do With My Tax Refund to Turn It Into More Money
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- I’m getting a tax refund for the first time in years, and I’m using it to make more money.
- I’m opening a CD and a new high-yield savings account for safe growth.
- And I’m investing in a new business and some stocks and crypto in hopes of bigger returns.
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For the first time in a few years, I’m getting a tax refund. When my accountant told me the news, I didn’t get excited to spend that cash on new clothes, a summer vacation, or even to just deposit the check in my savings account. I got excited because I wanted to use that money to challenge myself to see how I could grow it or even double it over time.
When I got my last tax refund check, I immediately stuck it in my checking account and ended up spending it way too quickly on everyday purchases. Within a few months, that refund check was spent on lattes, shoes, a plane ticket, and a handful of other things. I decided that the next time I got a tax refund, I’d turn that check into more money. Here are the five ways I plan to do that in 2021.
1. Put some of the cash in a CD
I wanted to find a few different ways to make money off my tax refund, including some ways that were safe. One of those ways was to find the highest annual percentage yield CD I could find as a way of putting some of the cash aside and earning a little bit of money off it after the term expired.
At the start of May 2021, I found a CD that offered 0.65% APY and decided that I’d put a fifth of my tax refund there, along with a large chunk of cash from my savings account (since this interest rate is higher than my current savings account rate).
I won’t make a lot of money through this method, just around $45 or $50 after nine months. But that’s more than I’d make if I just flat-out spent that cash on meaningless purchases.
2. Invest in stocks and cryptocurrencies
I’ve been investing in stocks for more than a year and recently started my cryptocurrency investing adventure. While investing a fifth of my tax refund into a few stocks and two different cryptocurrencies is a bit risky, I am making sure my decisions around which stocks I pick and which coins I buy are backed by research and are based on more than just my gut feeling.
For example, there are two companies I spend a lot of time keeping up with (reading their earnings reports, following the news and trends in their industries, and more) that I’ve already bought stock in. I plan to use some of my refund to buy more stock in those companies since shares recently fell for the first time in a long time.
3. Start a side hustle
I spent a lot of the pandemic plotting a side hustle idea that I am working to launch in 2021. I’ve built the website, started creating the services, and wrote out the business plan. I have a strategy that should allow me to be profitable with this business in just a few months (based on competitor analysis, trends of my audience, and a unique service offering).
To get the business launched, I need a little bit of cash to pay for legal services (to write terms and conditions for the website and business) and to place an order for some potential merchandise I want to sell.
I decided to use a fifth of my tax refund to put toward this side hustle budget. While putting money toward launching a new side hustle comes with risk, if it is as successful as I hope it will be, I could triple that initial tax refund investment in just six months.
4. Contribute to my SEP IRA
One long-term plan I have to make money off my tax refund is to make an extra contribution to my SEP IRA. I already try to make a monthly contribution of a few hundred dollars to my SEP IRA, but I also plan to put in a fifth of my tax refund to help boost my 2021 deposits into that retirement account.
While this money won’t come in handy for another 30 years, it helps me meet another 2021 financial goal of mine, which is to actively and consistently contribute to my retirement account to help catch up (since I didn’t start saving for retirement until my late 20s).
5. Find a new high-yield savings account
Since I don’t plan to spend any of my tax refund this year, the last fifth of it will go into a high-yield savings account. I plan to open a new HYSA with the best interest rate currently offered. I’ll keep the money in this account until I have a future need for it or another way to make money from this money (like investing in a rental property, buying a house, etc.).
Another big rule I have for this tax refund is that any money I make from investments, my side hustle, or accounts I put the money into, I’ll use to reinvest and continue to make money. Perhaps in a couple of years, I can turn this tax refund into quite an impressive amount of personal gains.