Invest Your Refund rather than Spend it

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If you get a tax refund this year here is some motivation to encourage you to invest your refund to create wealth for you in the future rather than spend it all now.


It is often stated by those that study the wealthy that one of the significant differences between the wealthy and those that struggle to get ahead financially is that wealthy think long term and make decisions based on what is best for them in the long run. Those that were able to achieve wealth were willing to make sacrifices now in order to realize the gain 10+ years in the future. Those that struggle to get ahead financially tend to think short term and make financial decision based on what is best for them now or the next few months rather than what is best for them in 10+ years.


Studies show that the wealthy establish an unbreakable habit of steadily investing a portion of their income each month into assets that create income. They build their wealth month by month. They slowly but surely create wealth by patience and persistent investing rather than by taking shortcuts through high risk get rich quick approaches. Slow and steady wins the race as illustrated in the story Tortoise and the Hare.  On the other hand, those that never seem to be able to get ahead financially are not willing to cut expenses in order to regularly invest in stable assets and so they don’t benefit from wealth created by compound interest.


Many of those that have well over $1 Million in their retirement accounts by steadily investing for 20+ years only put in ~ 30% of the money that is in their accounts. The other ~70% of the money that is in their accounts came from compound interest. In other words, most of their wealth is not from what they put in each month but from the return on what they put in each month.


You don’t have to be a high-income earner to achieve wealth. A recent study of 10,000 millionaires stated that 1/3 of the millionaires interviewed never had a six-figure household income in a single working year. It said only 31% of the millionaires they interviewed averaged $100K household income a year and only 7% averaged over $200K household income over the course of their year. These numbers are from the book “Everyday Millionaires” by Chris Hogan page 73. Other interesting statistics in this book are:

“79% of millionaires did not attend prestigious private schools. 62% graduated from public state schools, 8% attended community college and 9% never graduated college at all.” (Everyday Millionaires by Chris Hogan, page 63).

“The average millionaire hits the $1million mark at 49 years old. This is after years—decades, in fact– of hard work. Only 5% of millionaires got there in ten years or less. (Everyday Millionaires, page 52)

“79% of millionaires reached millionaire status through their employer-sponsored retirement plan” (Everyday Millionaires, page 41)

“76% of millionaires say that anyone in America can become a millionaire with discipline and hard work (Everyday Millionaires, page 26)

“79% of millionaires received zero inheritance, meaning only 21% received any inheritance at all. 84% received $0 to $100,000, which means that 84% of millionaires did not receive enough inheritance to make them a Millionaire (Everyday Millionaires, page 20)


This study gives hope to all of us. A rephrasing of the key points and statistics summarized on p84 of Hogan’s book is that most millionaires did not inherit their money, they did not get lucky, they did not make risky investments, they did not take high risks to get rich quick, they don’t come from prestigious schools, and most surprising is that they did not have high paying jobs.


This is very encouraging. It says we can all do this. It is not out of our reach. Start the journey and try to invest that tax refund. Read from those that will encourage you to save and invest. In the next few blogs I will provide some investing tips to help you avoid some common pitfalls on your journey.