Tax Refund? What are you going to do with it?

We have some suggestions if you want to create a feeling of financial freedom.

(1) Pay debts – Use the refund to pay debts that are from consumption or non-appreciating assets like credit card debt, student loans, car loans, medical debts, etc.

(2) Fund expected and unexpected expense saving accounts – Creating these reserves to draw from when necessary can avoid you from creating debt when life events occur.

(3) Invest it – There are so many opportunities to grow your money. We generally suggest the stock market, real estate, or businesses.

(4) Create a fun fund – If you have all your debts paid off, fully funded expected and unexpected saving accounts, and you are investing consistently a percentage of your income regularly, it is time to have some fun! You can save it up for something big or use it for some special occasions.

If your refund is large, you may want to look at adjusting your withholding or your estimated tax payments.

Above all else, always consider using your refund to improve your financial situation.

How much should you pay yourself?

Image courtesy of David Castillo Dominici at freedigitalphotos.net

Image courtesy of David Castillo Dominici at freedigitalphotos.net

Well, it depends. If you have ever been a business owner you know what we mean. Technically speaking you should get paid what you are worth but as a business owner there are many variables that need to be considered.

One very important consideration is to pay from the profits, ONLY. It can be difficult to watch the money come in and think WOW I got it made! But if your expenses are large you really don’t. So be careful to only pay from the revenue minus the expenses or the profit.  Remember to include TAXES in your expenses.

In some legal business structures the business owner’s pay might be restricted. For instance, if the business is incorporated and there are stockholders, usually the business owner is on the payroll, like an employee. Conversely in a sole proprietor situation you can pay yourself whatever you want!

As a business owner, do you feel you are paid enough? Please comment.