Smart Ways to Put your Tax Return to Work March 26, 2013My MoneyOff

It’s that time of year everyone dreads: tax season.

But, there is at least one redeeming reason to search for receipts and source W-2s: the return.

TD Ameritrade’s survey predicts 47 percent of Americans will receive a tax refund, and many are planning to splurge on big ticket items and exotic vacations.

As tempting as it is to spend it all right away, remember “your tax return is not ‘free money,'” says Elle Kaplan, CEO and Founding Partner of Lexion Capital Management LLC.

“It’s money you’ve already paid, so the smartest way to spend it on yourself is to invest in yourself.”

Saving and investing are the best ways to put your tax return to work for you.

Kaplan advises having six to eight months of living expenses in emergency savings.

“If you think that sounds like a burden, imagine having to deal with an unexpected tragedy and having no money saved to deal with it,” she points out.

Once an emergency fund is established, Kaplan suggests starting an investment account.

“Think about every millionaire and billionaire you know of. They have something in common: an investment account.”

There are two ways to make money: working, and/or making that money work for you.

If you don’t invest, you’ll never make more than you can save.

“This is the spa treatment that will keep on giving,” says Kaplan. “You are paying for your future self, and that’s something to feel fantastic about that.”

Bonus PINK Link: Five Things Investors Should Know About the Current Economy.

What are you planning to do with your tax return?

By Sarah Grace Alexander

“There are people who have money and people who are rich.” Coco Chanel

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