The April 15 tax deadline has passed and many are celebrating the hefty tax refunds they were “given” by treating themselves to vacations, ipads, motorcycles, and other expensive purchases with their hard-earned withheld cash, not realizing that they were entitled to these funds all along. As a finance geek, I would urge readers to use their tax refunds to pay off debt, plunk down as an extra mortgage payment, drop into a Roth IRA, or maybe a 529 savings plan for their youngsters.
This year was the first year that I received a substantial tax refund (around $1,500). I usually strive for a break-even result rather than provide an interest free loan to Uncle Sam. However, this year included extra write-offs including investment losses and sales tax deductions from my car purchase.
My plan of attack for these funds doesn’t involve motorcycles, boats, ATV’s or Caribbean cruises. Rather, I’m using the proceeds to start my Lending Club investment account. For those of you unfamiliar with lending club and peer to peer lending, it basically attempts to cut out the middle men of consumer lending (banks) and allow everyday Joe Blows to get a piece of the investing action by investing or loaning money to qualified borrowers in increments as small as $25. The lenders have a wide field of data they can sort by in choosing individual $25 notes, or allow Lending Club to create a portfolio based upon certain criteria. The potential yield is larger for those clients perceived as high-risk, while obviously lower for those with firmer financial footing and history.
I made a goal to improve my interest earned on my funds currently plunked into a savings account earning zilch. Initiating the Lending Club account is a good start to achieving this goal and I’m eager to dip my toe into the P2P Lending world after reading rave reviews from some of my favorite finance bloggers, Mr. Money Mustache and Mr. 1500.
What are your plans for your tax refund?